Internal Audits: The Basics

Internal Audits: The Basics E-Invoicing Offers Huge Potential Savings Study Accounting MLM-Executive Chronicles

ExecutiveChronicles | Internal Audits: The Basics | Most people have heard of the term internal audit either in the course of their job or through a form of media; television, reading, or movies. However, many of us that have heard the term will not necessarily know what it means in practice or how an internal audit can impact a business.

Whether you are new to owning a business, recently promoted into a role where internal audits are part of or impact your role, or you are interested in finding out more, you are in the right place. We have detailed below what an internal audit is and other relevant pieces of information to help you understand the process. 

What is an Internal Audit?

An internal audit is the assessment and evaluation of a company’s internal processes and controls for risk management. The aim of an internal audit is to identify any weaknesses within your company that could pose a risk to the business, its operations, or the customers. The benefits of an internal audit are that the auditors will look at other aspects of the business also. 

In addition to the risk assessment aspect of the audit, an internal auditor will also assess the viability of business growth, environmental impact assessments, employee satisfaction, and customer satisfaction. External auditors will not consider any of these factors or look for business improvement based on them. 

An internal audit is an excellent way to aid the success of your business, the internal audit process will provide your business with the assurance that everything is operating as it should. This will be carried out through conversations with your directors and management to review how the business is currently operating. 

If there are further improvements that can be made, the internal auditor will then provide suggestions for how the improvements can be made. It is then a business decision as to which, if any, of the suggestions you decide to take forward. 

Internal audits will also ensure that you are compliant with all necessary legislation for the business sector that you operate within. 

When is an Internal Audit Necessary?

Internal audits should be completed regularly to ensure that your business is operating in as low a risk a way as possible. The ongoing internal audit process should be carried out in line with the legal stipulations of the industry and state that your business operates within. This will ensure that your business remains compliant with all legal obligations and help to maintain the reduction in risk. 

In addition to the statutory requirements for auditing, your business should carry out audits on an ad hoc basis as there are changes that will affect your business. This could be if there is a serious complaint made by a member of staff or a customer as part of a merger process or if there are any major security breaches, either in person or a cyber breach. Your business may also wish to carry out an ad hoc internal audit in preparation for a federal external audit or in the case of any form of litigation against your business. 

Completing ad hoc internal audits will give you information that could be discovered in an external audit and will allow you the time to correct this before the external or next formal internal audit. You can choose the frequency of ad hoc internal audits to suit your business needs. 

Who Can Complete the Internal Audit?

An internal audit should always be independent and objective to ensure that all risks are identified and dealt with. You can choose to hire a company like CIC, which employs a range of highly specialized and experienced auditors on its team. 

CIC will also assist your company with the entire internal audit process, from the initial plan of how your company will carry out the audit right through every stage until the audit is complete and you are reviewing the recommendations. 

You can outsource your internal audits to a third-party company of your choice, providing they are completely impartial and have no vested interest in your company achieving a particular object for their own gain. 

You should always ensure that any third-party companies that you choose meet all of the service needs of your company. If you are unsure whether or not a company meets your needs, you can request more information or request a bespoke audit service. If the internal audit you are commissioning does not meet the same standards as would be covered in an external audit, it will be a waste of your time and money to conduct. 

The team you choose to complete your internal audit should be able to carry out all aspects of the audit without having to commission or delay any parts of the audit process. You can request that due diligence is carried out prior to the official audit, which will help you identify exactly where the audit should focus and determine which staff members will be involved. 

You can also employ a third-party company such as CIC to structure and plan the audit that will be carried out internally. This will ensure that the audit completed covers everything required by your business in the most efficient way possible. 

The company will carry out the audit reporting all findings directly to you for review. This will include the fully analyzed data and the full recommendations of the audit team for any changes or improvements that are required. 

Choosing the Audit Company

When deciding which company you will employ to carry out the internal audit, you should focus on the skills and experience of the team you select. Ensuring that the internal audit team has the correct level of knowledge and experience in your chosen sector and state will be the main deciding factor for most companies. Without this knowledge and experience, there could be areas that are missed. 

If you choose a company that provides you with an audit plan, ensure that you thoroughly review this before the audit takes place to ensure it fully meets each need of your business.