What is a Limited Audit?

In a limited audit, the audit team confines its operations to certain audit procedures, or only examines certain functional areas of an organization. Thus, a limited audit has a more restricted scope than a full audit. A business might opt for a limited audit when it only needs to have a specific area examined, or cannot afford the fee for a full audit.

Auditors cannot produce a clean audit opinion when they have engaged in a limited audit.

Examples of Limited Audits

A limited audit only investigates pre-determined areas or concerns. Below are some examples of these types of audits:

Financial statement components audit. This might be an audit of only accounts receivable to ensure they are accurately recorded and collectible, or perhaps just an examination of the inventory valuation to verify that inventory is stated correctly under applicable accounting standards. Or, an auditor might conduct a review of a specific expense category, such as travel expenses or marketing costs, for compliance with company policy.
Compliance audit. This might be a review of compliance with specific tax regulations, such as VAT or GST filings. Or, it might be an assessment of adherence to environmental or safety standards for a specific facility.
Internal controls audit. This might be an evaluation of internal controls over payroll processing to identify potential fraud risks or errors. Another possibility is a review of the effectiveness of controls in cash handling or petty cash transactions.
Operational audit. This might be an examination of procurement procedures to ensure compliance with company policies and cost-effectiveness. Another possibility is an audit of a single production line or department for efficiency or waste management.
Special-purpose audit. This might be an investigation of a suspected fraudulent transaction or series of transactions. Or, it might be an examination of financial records for a specific project, such as a government grant or a construction contract.
Sales audit. This might be the verification of sales from a specific product line or geographic region. Another possibility is an assessment of revenue recognition practices for a specific type of transaction, or perhaps a review of discounts and promotional offers to ensure compliance with company policies.

These limited audits are usually tailored to meet specific objectives and are often conducted when there are targeted risks or concerns that require focused attention.