Factory audit: what the visit checks, a checklist, and what a failed result looks like

A factory audit checks whether a supplier can keep making good lots, legally, before you pay a deposit. The three types, what the auditor looks at, what failing means and what it costs.

Filed under Line watch and quality control

Short answer: A factory audit is a one- or two-day visit that checks whether a supplier can make your product consistently and legally, before you place the order. It looks at the business, the equipment, the quality system and the workforce. A failed result usually means a corrective action plan and a re-audit. A few findings, such as held passports or a hidden subcontractor, should end the conversation.

A factory audit answers a different question from an inspection. An inspection asks whether this lot is good. A factory audit asks whether this supplier can keep making good lots, at the volume you need, without breaking laws that would stop your goods at the border. This note covers the three kinds of audit buyers order, what the auditor actually checks on the visit, what a failed result looks like, and what it costs. If you are still at the stage of deciding whether a supplier is a factory at all, start with how to tell a real factory from a trading company.

Three kinds of factory audit

Most audits a buyer books fall into one of three types, and they answer different questions.

Factory verification (capability). Is the company what it says it is? The auditor confirms the business license, the address, the size of the site, the equipment list and the headcount, and compares them with what the supplier claimed. This is the cheapest audit and the one that catches trading companies posing as factories.

Quality or technical audit. Can this factory hold your specification, lot after lot? The auditor walks the process from incoming material to finished goods and checks whether there is a working quality system, not just a certificate on the wall. Professional auditors work to the method in ISO 19011, the international guideline for auditing management systems such as ISO 9001.

Social compliance audit. Are the people who make your product treated legally and safely? The two schemes most US and European retailers ask for are amfori BSCI and Sedex's SMETA. In a SMETA audit, Sedex says, "the auditor will review the site's documentation, records, policies, processes, practices, operations, workers and conditions" across labor, health and safety, environment and site management. The 2-pillar version covers labor standards and health and safety; the 4-pillar version adds environment and business ethics, and Sedex says most buyers now choose it.

A retailer will usually tell you which social audit it accepts. For a first order with a new supplier, a verification plus a quality audit is the common starting point.

What the auditor checks on the visit: a factory audit checklist

A good audit follows the product through the building and asks for evidence at each stop. Records and observation count; a manager's description does not. Use this as your checklist when you read a report or brief an auditor.

1. The business. License, legal name, registered address and scope of business match the company you are paying. Ask who owns the building and how long the lease runs.
2. Capacity. The equipment on the floor matches the equipment list, the machines are running, and the stated monthly output fits lines times shifts times yield. Idle, dusty machines are a finding.
3. Incoming material. Raw material is checked on arrival against a specification, labeled, and stored so that rejected material cannot drift into production.
4. Process control. Work instructions are posted at the stations that need them, a first piece is approved at the start of each run, and someone checks parts during the run, with records.
5. Measurement. Gauges and test equipment carry calibration labels with dates that are current.
6. Nonconforming product. There is a marked area for rejects, and records show what was scrapped, reworked or returned to a supplier.
7. Final inspection and traceability. Finished goods are inspected before packing, and a lot can be traced back to its material and production date.
8. Subcontracting. Every process done outside the building, such as plating, painting, heat treatment or printing, is named. Undisclosed subcontracting is a serious finding.
9. People and safety. Time records, payroll, worker ages, fire exits, extinguishers and machine guarding. Social audits go much deeper here, including private worker interviews.

A note on the last point. The ILO's 2025 indicators of forced labor set out the warning signs, including withholding of wages, debt bondage and excessive overtime. On held documents the ILO is direct: "Retention of identity and/or travel documents is a very common means of control, especially for migrant workers."

What a failed factory audit looks like

Most audits do not end in a simple pass or fail. Findings are graded by severity, and the report ends with a score or rating.

In amfori BSCI, the overall rating runs from A to E. The scheme's own guidance explains what follows: "If the audit grade is below "B" (C, D, or E), the supplier needs to have a follow-up audit between two and twelve months after the full audit." Suppliers rated A or B are re-audited "at the latest in two years' time."

Quality audits use a similar structure. Minor findings, such as a missing calibration label, go on a corrective action plan with a date. Major findings, such as no incoming inspection at all, need a fix and evidence before the first order. A failed result is not always a reason to walk away; a factory that fixes its findings quickly and shows you the evidence is telling you something useful about how it will handle problems on your order.

Some findings should end the conversation:

• Forced labor indicators. Held passports or ID cards, withheld wages or debt that workers cannot leave. Beyond the ethics, this is a customs problem. US law says goods made "wholly or in part" with forced labor "shall not be entitled to entry into the U.S."
• A hidden subcontractor. If your product is really made somewhere else, the audit you paid for describes the wrong factory.
• Two sets of books. Time records that do not match payroll, or records that look freshly written for the visit.
• No access. A locked area, a building the auditor may not enter, or a production line that stopped the day the auditor arrived.

What a factory audit costs and how long it takes

Audit firms price by the man-day, one auditor for one day on site. V-Trust lists its standard factory audit at "398 USD/man-day" all-inclusive in Asia's main manufacturing clusters. QCADVISOR's published rates start at USD 280 per man-day across most of Asia, with some markets at USD 380, and it describes a verification audit as usually 1 man-day and a technical audit as typically 2. Social compliance audits under a named scheme are booked through that scheme's approved audit firms and quoted separately.

For a typical first supplier check, that puts a verification plus a technical audit at well under the cost of one bad production lot. Book it before you pay the deposit, not after.

How to use the report

Read the findings, not the score. A factory can score well overall and still fail the one process that matters for your part. Ask for the corrective action plan with dates, and for photos as evidence when each item closes. Put the audit date and the open findings in your purchase order file, and re-audit at least once a year or whenever the supplier moves a process or a building.

An audit is also not a substitute for checking the goods. It tells you the system works; a pre-shipment inspection tells you this lot is right. JCH checks every order at incoming material, first article, in-process and pre-shipment, as set out in step 9 of our process. If you already have a supplier and want someone on the floor, line watch puts one of Jack's inspectors on your line. To talk through an audit plan for a new supplier, send us the details.

Straight answers

What is a factory audit?

A factory audit is an on-site assessment of a supplier, usually one or two days, that checks whether the business is what it claims, whether its equipment and quality system can make your product consistently, and whether workers are treated legally and safely. It is done before an order, unlike an inspection, which checks a finished lot.

What are the main types of factory audit?

Factory verification (does the company, site and equipment match its claims), quality or technical audit (can the factory hold your specification lot after lot), and social compliance audit, such as amfori BSCI or Sedex SMETA (labor, health and safety, and in the 4-pillar SMETA also environment and business ethics).

How much does a factory audit cost?

Audit firms charge per man-day. Published rates include USD 280 per man-day across most of Asia and USD 380 through vetted partner factories and South Korea from QCADVISOR, and 398 USD per man-day all-inclusive from V-Trust. A verification audit is usually one man-day and a technical audit about two.

What happens if a factory fails an audit?

Usually the factory gets a corrective action plan with deadlines and a follow-up audit. In amfori BSCI, a C, D or E rating requires a follow-up audit between two and twelve months after the full audit. Findings such as held identity documents, hidden subcontracting or falsified records are reasons to stop working with the supplier.

Is a factory audit the same as a pre-shipment inspection?

No. A factory audit checks the supplier's system and capability, usually before the first order. A pre-shipment inspection checks a finished lot against your specification before it ships. Most buyers need both.

How this note was made: researched and drafted with AI assistance, checked against the sources listed below and edited at JCH Design & Manufacturing.