The activity of carefully examining a single process that spans across different functions or departments.
Horizontal Audit Details
Every company has its unique process of doing things, whether it's manufacturing, purchasing, repairing, or recruiting. Because time marches relentlessly and humans are imperfect beings, those processes can degrade over time. Uncorrected small mistakes can snowball into a procedure breach, leading to an incident that can cost a lot of time and money, even lives.
An audit is vital for companies because it makes sure that all thoroughly follow procedures. A process can't be modified as easily when it involves many departments and has existed for decades. An audit serves as a medium to modify and refine a process to improve its efficiency.
A horizontal audit follows one process across different departments. Auditors follow each process closely, examining every detail, asking staff questions, and testing every possible liability. Most importantly, auditors check how each process is handed to other departments. Are both parties following SOP? How is the goods' condition before and after the transfer? How quick is the transfer process? Those are the questions auditors must pose to refine the process.
Example of Horizontal Audit
The first step is to receive finalized order from the buyer. The planning department receives data from the buyer, including the style number, color number, garment size, garment quantity, packaging types, and shipping information. Once received, they break down the data and list them in an invoice document, sent to the export department for further process.
The export department receives the invoice document and begins to book shipping space to its trusted shipping brokers. The export department also books vehicles and containers for the stuffing process. The export department must make a close follow-up to ensure the vehicles and containers will arrive on time. Once arrived, the export department performs a thorough check-up on the vehicles and containers to ensure they're up to shipping standards.
The cleared vehicle will park in the factory warehouse, and the packing department will begin the stuffing process. Boxed garments are stacked within limits and carefully put into the containers. Once the stuffing process is completed, the export department, planning department, and packing department will confer to check if all data from the respective departments match and is correct. When it's settled, the export department will seal the container and send it to the harbor for the further shipping process.
An auditor who audits horizontally will follow each process across different departments carefully. For example, suppose the packing department found a hole on the container's wall (which violates shipping standards). In that case, the auditor must question the export department on how they check the container and why they missed the hole on the said container's wall.
The auditor must know the root cause of the holed container and who committed it. The auditor must be aware of the possibility of similar mistakes that has the same root cause. Finally, to assess the mistake's severity, the auditor must know how much the mistake will damage the company's finances and prestige.
The auditor will record the whole ordeal in a written document for archiving. The auditor must ask each involved party to send in their reports regarding the incident. The report contains chronological order of what happened before and after the incident. After carefully examining all reports and assessing the auditing process's different factors, the auditor must improve the process's foolproof-ness by adding an extra step such as asking security personnel to check the container together with the export department.
Significance of Horizontal Audit
The importance of communication can't be understated. Miscommunication is the simplest form of human error, but it's massively widespread and potentially destructive. Miscommunication is also very hard to detect and prevent – people often don't notice they had heard the wrong information unless someone asks and cross-checks it. This provides a big challenge for the auditors.
From the example above, if the packing department couldn't spot the hole on the container's wall, it could be soiled with seawater on its sea voyage. The exquisite garments inside will be compromised, the buyer will not be pleased, the factory will receive a penalty, and the factory's prestige will decrease. Departments can prevent these mishaps with a five-minute thorough checking inside the container.
This is why horizontal auditing is so important. It aims to ensure that communications between departments are well-maintained, so the process becomes more efficient, and the product quality will improve. The auditor could enhance the process by adding another step inside the double-checking process, improving the equipment quality and accuracy, or establishing an efficient monitoring system.
Horizontal Audit vs. Vertical Audit
A horizontal audit is auditing one process across different departments. The primary purpose is to check how well departments communicate with one another, fix inefficiency caused by "back and forth" communication, and creating measures to prevent miscommunication between departments.
A vertical audit is auditing all processes that are within one department. For example, a packing department purchases cardboard for packing, storing inventories in the warehouse, packing garments, and putting finished garments inside containers for shipping. Vertical auditing examines all these responsibilities and checks whether the department does it efficiently and accurately.
Horizontal auditing and vertical auditing are often used hand-in-hand. Auditor determines which factors need the most improvement. If it's a factory-wide aspect such as "planning," auditors should do horizontal auditing following a process with the closest relation to planning and involves multiple departments. If it's an underperforming department, auditors should do vertical auditing focusing on that particular department, examining responsibilities, schedules, and equipment, looking for something to improve upon.