In the GCP world, we tend to use "inspection" for any review conducted by a regulatory authority, and "audit" for a review conducted by a pharma company, laboratory, or vendor's quality unit. How did this distinction arise?
Like so much else, "inspection" and "audit" are concepts inherited from manufacturing. In ISO 9001: 2015, inspection is defined as “determination of conformity to specified requirements.” Audit is defined, somewhat tautologically,as “systematic, independent and documented process for obtaining objective evidence and evaluating it objectively to determine the extent to which audit criteria are fulfilled.” Broadly speaking, an inspection determines whether a single product meets regulatory and other requirements. An audit determines whether an entire quality management system is capable of producing products that meet requirements.
Regulatory authority inspections that focus on a pivotal study of a particular drug that's been submitted for approval thus meet this definition of "inspection," but they frequently veer into "audit" territory (especially for ex-US regulatory authorities) when they look closely at the underlying procedures and systems that supported clinical development.
Conversely, many Quality Assurance "audits" have an element of inspection to them when they focus on a single study or clinical site.
Interestingly, "inspection" comes from a Latin root that means "to look at," whereas the root of "audit" means "to hear."