The report, commissioned by NHS Diabetes, said there is "cause for concern" about the errors, which "are worryingly common" in hospitals across the country.
It found that mistakes by doctors and nurses are affecting around 37% of inpatients in UK hospitals. These mistakes include errors in terms of drug dosage and the times that patients are supposed to receive their medication.
There were mistakes in 26% of the medical charts analysed in the audit and a fifth of prescriptions contained one or more errors on how medicines were being managed in hospital.
The report's findings suggest that there could be a rise in the number of medical negligence cases filed against hospitals if they continue to make such mistakes.
The errors related to drugs including insulin as well as tablets to keep blood sugar under control.
The report pointed to "significant issues" concerning the use of insulin drips in hospitals.
Some 13% of patients with diabetes had been on an insulin drip for the previous seven days but 8% of drips were considered "inappropriate".
Overall, 10% of insulin drips exceeded seven days and 12% were considered "inappropriately long".
In more than a quarter of cases (26%), the transfer of the patient back on to insulin injections "was not managed appropriately", the audit said.