What characterizes an extrinsic audit?

What characterizes an extrinsic audit?

• A. It is conducted internally within the company
• B. It is performed by the organization itself
• C. The company is audited by an external customer
• D. It involves only document reviews

Answer: (C)

An extrinsic audit is characterized by being conducted by an external entity, typically involving a third party such as a customer, regulatory body, or independent auditor. This type of audit assesses the organization's adherence to specific standards or requirements as perceived by external stakeholders. The primary focus is on the compliance and overall performance of the company from an outsider’s perspective, which provides a level of objectivity that internal audits might lack. In this context, the company being audited by an external customer reflects this objective standpoint, helping to ensure that practices align with external expectations and regulatory requirements. It serves to build trust and validate the organization's processes and outputs in the eyes of those who rely on its services or products. The other options describe internal auditing scenarios or aspects not pertinent to the definition of extrinsic audits. For instance, conducting audits internally or performing them by the organization itself pertains to intrinsic audits, which are not focused on external assessment but rather on internal controls and processes. Similarly, limiting the scope of the audit to document reviews does not capture the comprehensive nature of extrinsic audits, which often include site visits and interviews in addition to document evaluation.

An extrinsic audit is characterized by being conducted by an external entity, typically involving a third party such as a customer, regulatory body, or independent auditor. This type of audit assesses the organization's adherence to specific standards or requirements as perceived by external stakeholders. The primary focus is on the compliance and overall performance of the company from an outsider’s perspective, which provides a level of objectivity that internal audits might lack.

In this context, the company being audited by an external customer reflects this objective standpoint, helping to ensure that practices align with external expectations and regulatory requirements. It serves to build trust and validate the organization's processes and outputs in the eyes of those who rely on its services or products.

The other options describe internal auditing scenarios or aspects not pertinent to the definition of extrinsic audits. For instance, conducting audits internally or performing them by the organization itself pertains to intrinsic audits, which are not focused on external assessment but rather on internal controls and processes. Similarly, limiting the scope of the audit to document reviews does not capture the comprehensive nature of extrinsic audits, which often include site visits and interviews in addition to document evaluation.