Third Party Risk Audit Report Template

Third-party relationships introduce many data breaches according to Ponemon Institute's 2023 study. Yet most organizations still document vendor assessments in scattered emails and inconsistent spreadsheets. A standardized Third Party Risk Audit Report Template transforms chaotic findings into actionable intelligence.

The template serves as your single source of truth for vendor assessments. It captures control testing results, documents evidence collection, maps findings to compliance frameworks, and tracks remediation through closure. Finance teams use it for SOX compliance. Healthcare organizations apply it for HIPAA assessments. Technology companies leverage it for SOC 2 vendor management.

Without this structure, critical risks hide in unread attachments. Auditors struggle to verify your third-party oversight. Remediation stalls without clear ownership. The template eliminates these gaps through consistent documentation that satisfies both internal governance and external regulators.

Core Template Sections

Executive Summary

The executive summary delivers verdict first. Risk tier (Critical/High/Medium/Low), overall compliance percentage, and top three findings appear above the fold. Decision makers need binary answers: proceed with contract or remediate first.

Include:

• Vendor profile (services provided, data access, criticality rating)
• Assessment scope and methodology
• Risk tier assignment with justification
• Critical findings requiring immediate attention
• Recommended actions (approve, conditional approval, reject)

Risk Assessment Matrix

Map identified risks across likelihood and impact dimensions. Financial services firms typically use 5x5 matrices per OCC guidance. Healthcare organizations often prefer 3x3 grids for HIPAA assessments.

Standard risk categories:

• Information Security: Data protection controls, encryption standards, access management
• Operational: Business continuity, incident response, service level agreements
• Compliance: Regulatory adherence, certification status, audit rights
• Financial: Viability assessments, insurance coverage, contractual terms
• Reputational: Past incidents, reference checks, litigation history

Control Testing Documentation

Each control requires three elements: test procedure, evidence collected, and pass/fail determination. Avoid narrative descriptions. Use tables.

Control ID	Control Description	Test Procedure	Evidence	Result	Notes
AC-2	User Access Reviews	Review Q3 access certification	Screenshots dated 9/15/23	PASS	Monthly reviews exceed requirement
BC-1	Business Continuity Testing	Verify annual BCP test	No evidence provided	FAIL	Last test 2021

Evidence Inventory

List every document collected during the assessment. Include version numbers, dates, and validation status. Auditors will verify this inventory.

Required evidence typically includes:

• Security policies and procedures
• Penetration test reports (last 12 months)
• Vulnerability scan results
• Compliance certifications (SOC 2, ISO 27001, etc.)
• Insurance certificates
• Financial statements (if material vendor)
• Subcontractor lists
• Data flow diagrams

Findings and Remediation Plan

Structure findings with clear ownership and deadlines. Vague recommendations die in committee. Specific actions with named owners drive closure.

Each finding requires:

• Unique identifier (FIND-2024-001)
• Risk rating based on your matrix
• Detailed description of gap
• Business impact if unaddressed
• Specific remediation requirement
• Vendor owner and contact
• Target completion date
• Validation method

Industry-Specific Applications

Financial Services

Banks and investment firms face OCC Bulletin 2013-29 requirements. The template must document:

• Concentration risk analysis across vendor portfolio
• Fourth-party (subcontractor) identification
• Ongoing monitoring procedures
• Board reporting summaries

Add sections for:

• GLBA Safeguards Rule compliance
• Anti-money laundering controls
• Reg W affiliate transaction reviews
• FDICIA internal control assessments

Healthcare

HIPAA requires Business Associate Agreements (BAAs) plus technical safeguards verification. The template expands to include:

• PHI data flow mapping
• Encryption standards validation (at rest and in transit)
• Breach notification procedures
• Minimum necessary access reviews
• Physical security controls for data centers

Technology/SaaS

Software vendors need deeper technical assessments. Add sections for:

• API security controls
• Multi-tenancy isolation
• Source code security practices
• DevOps pipeline controls
• Cloud infrastructure configuration
• Penetration testing methodology

Compliance Framework Alignment

SOC 2 Requirements

Map findings to Trust Services Criteria:

• Security (CC6.1 - Logical and Physical Access Controls)
• Availability (A1.1 - Capacity Planning)
• Confidentiality (C1.1 - Data Classification)
• Processing Integrity (PI1.1 - Input Validation)
• Privacy (P6.1 - Data Subject Rights)

ISO 27001 Mapping

Align to Annex A controls:

• A.5 - Information Security Policies
• A.8 - Asset Management
• A.12 - Operations Security
• A.15 - Supplier Relationships
• A.18 - Compliance

GDPR Article 28 Verification

Document processor compliance:

• Data processing agreements
• Sub-processor approval rights
• Data deletion procedures
• Cross-border transfer mechanisms
• Breach notification timelines (72 hours)

Implementation Best Practices

Start with risk tiering. Critical vendors (access to sensitive data, single points of failure) receive full assessments. Low-risk vendors get abbreviated reviews. Document your tiering methodology.

Automate evidence collection. Send vendors secure upload links, not email requests. Use intake forms that map to your template sections. Track completion percentages.

Set review cycles upfront. Critical vendors: annual. High-risk: 18 months. Medium: 24 months. Low: 36 months or trigger-based. Built these into your vendor contracts.

Create finding libraries. Common gaps appear repeatedly. Standard finding language speeds report creation and ensures consistent remediation requirements.

Track metrics religiously. Assessment cycle time, findings per vendor, remediation closure rates, and overdue assessments feed your program maturity metrics.

Common Implementation Mistakes

All-or-nothing assessments. Not every vendor needs 300-question DDQs. Right-size based on risk. A marketing analytics tool doesn't need the same scrutiny as your payment processor.

Orphaned findings. Without owner assignment and escalation paths, findings languish. Build escalation triggers: 30 days overdue escalates to vendor executive, 60 days triggers contract review.

Static risk ratings. Vendor risk changes. Mergers, breaches, and service expansions require rating updates. Schedule quarterly rating reviews for critical vendors.

Evidence hoarding. Collecting everything buries critical gaps. Define minimum evidence requirements by vendor tier. More isn't better—relevant is better.

Compliance theater. Checking boxes without understanding actual risk wastes everyone's time. If a control doesn't reduce real risk, challenge its inclusion.

Frequently Asked Questions

How detailed should findings be in the audit report?

Include enough detail for someone unfamiliar with the vendor to understand the risk and required remediation. Minimum: specific control gap, potential impact, and exact steps to remediate.

Should we include all testing evidence in the report?

No. The report references evidence (document names, dates, location) but doesn't include full copies. Maintain evidence separately in your GRC platform or secure repository.

How do we handle vendors who refuse to provide requested evidence?

Document the refusal as a finding. Note attempts made, vendor responses, and alternative assessment methods used. This becomes a high-risk indicator requiring legal review of contract terms.

What's the difference between this and a standard risk assessment?

This template documents completed assessments with findings and required actions. Standard risk assessments are often just questionnaires. This captures the full cycle: assessment, validation, findings, and remediation tracking.

How often should we update the template structure?

Review annually against regulatory changes and program maturity. Major updates typically coincide with new regulations (DORA, state privacy laws) or significant incidents that reveal assessment gaps.

Can one template work for all vendor types?

Core sections apply universally, but include modular additions for specific vendor categories. Cloud providers need technical architecture reviews. Professional services firms require personnel security sections. Build a core template with category-specific modules.

How do we score vendors with partially implemented controls?

Use maturity scales (1-5) rather than binary pass/fail for nuanced scoring. Level 1: not implemented, Level 3: partially implemented with compensating controls, Level 5: fully implemented with continuous monitoring.