What are audit criteria primarily used for?

Audit criteria serve as benchmarks against which the subject of the audit is evaluated. These criteria provide a basis for assessing whether the audited entity is conforming to specific standards, regulations, policies, or best practices. They help auditors determine the effectiveness of operations, compliance with laws, and the reliability of financial reporting or other specific objectives of the audit. In essence, audit criteria define what is to be examined, ensuring that auditors have a consistent foundation for their evaluations.

Establishing organization-wide policies, measuring financial performance, or assessing employee performance, while relevant to an organization’s overall functioning and governance, do not directly pertain to the primary role of audit criteria. Instead, audit criteria are focused specifically on the evaluation of the audit subject itself, ensuring that the audit process is aligned with set objectives and goals.