An internal audit is essential for the growth of a company by evaluating risks in an objective manner, assessing systems and processes to determine their efficiency and revealing hidden issues.
Based on all these, an internal audit could be the ideal process to keep different departments aligned to the company goals, not to mention the possibility to meet company objectives with no unpleasant surprises later.
Now, how do these internal audits work and what should you expect from them?
How Internal Audits Work
While anyone can do an audit, it’s highly recommended to opt for internal audit consulting services instead because a third party’s audit is considered more valuable and trustworthy than one your accountants could do.
The process takes your workflows, systems, records and other processes and analyzes them to determine the good and bad sides of the company. Financial documents and records are also taken into consideration.
When conducting an audit, a professional will try to identify:
- Potential issues
- Concerns
- Inaccuracies
- Risks and even fraud
These detailed investigations help organizations maintain transparency and integrity in their operational and financial practices.
The company performing the audit must be experienced and knowledgeable in terms of regulations and requirements of the industry, but the internal policies of your company are just as important.
While an audit often reveals negative things and potential issues as well, the truth is it can be just as good and underline some of the company’s strengths too. This provides valuable insights into both challenges and opportunities within the organization.
Apart from this deep research, the auditor will communicate results in an effective manner. Communication is just as important in the data gathering phase of the process, so expect many questions or inquiries about different documents.
All the information is then put together and handed over highlights key findings and recommendations.
There are more reasons wherefore companies get internal audits. Sometimes, they’re meant to provide valuable insights into the business and reveal more or less known details. Other times, reports are used prior to important processes.
For example, an internal audit could be necessary before an acquisition or a new partnership, helping organizations make informed strategic decisions by understanding their current operational and financial standing.
What to Expect from an Internal Audit
An internal audit involves digging deep into the records of your company. Simply put, records and processes, documents and papers will be required by the auditing team. There’s a great level of research that may require some work from your side too, especially when it comes to providing access to all these.
Communication is critical in the process, so expect many questions, requests and requirements too. The auditing team will likely engage in extensive dialogue to ensure they thoroughly understand your organizational ecosystem and operational nuances.
Good and Challenging Findings
As for the actual result, you’ll be happy to reveal positive things about your company, such as the areas where you’re doing well, compliance with regulations and successful processes. But at the same time, an audit could showcase fewer positive things as well.
Procedural Documentation Gaps
One of the most common findings is the lack of detail in internal procedures and policies. These things are often revealed in internal audits, but they can be easily fixed.
Transaction Documentation
Any type of transaction or control within operations must be documented in the smallest details. Regular revisions and updates are also required. Otherwise, discrepancies may occur in operations. Otherwise, discrepancies may occur in operations that could potentially impact organizational efficiency and transparency.
Segregation of Duties
Segregation of duties is another popular issue. Any process or task must have the right check in place. If someone in your company deals with payment collections, the same person should also deal with deposits, not to mention the books.
Segregating duties the wrong way could lead to a severe lack of communication and discrepancies in processes.
If this is your first internal audit, you shouldn’t be surprised if you miss some documents. It’s one of the most common issues, yet no one really expects it. The audit process is designed to be collaborative and constructive rather than punitive.
Document for Each Transaction
No matter what transaction you face, it must be supported by at least one document. For example, purchases must be backed by documents. The same goes to proposals, bids, invoices, approvals, you name it. Any type of transaction requires a document to establish a clear audit trail.
Missing such documents is common, but a little digging can usually help you retrieve them.
Talking about documentation, all evidence must be maintained to back approvals, statements, reconciliations and other similar things.
If there’s someone responsible for approvals in your company, their control access should match the role. Even if you have a small company and you handle all these things, make sure you understand the profile of your role and what it involves.
In the end, embracing internal audits is not about finding fault, but about continuous improvement, transparency, and building a robust, resilient organizational framework that can adapt and thrive in an ever-changing business environment.
It’s like having a GPS that helps you navigate the complex terrain of modern business, ensuring you stay on track and ahead of the competition. Remember, the most successful companies aren’t those without challenges, but those who can identify and address them quickly and effectively.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
