Internal audits are examinations and valuations performed within an organization, to regulate the reliability of its operational processes and procedures.
Internal control, is commonly referred to as management controls. This includes the design of organization, their methods and procedures adopted by management to achieve their missions, goals and objectives. Moreover, internal audits also prove to be a defense mechanism in detecting fraud and violations of laws, regulations and provisions of contracts and agreements.
Internal auditing comprises of:
- Processes used for planning, organizing, guiding and supervising operations;
- Systems used for measuring, reporting and examining performance;
- Appropriate actions taken by the administration to augment risk-management and increase the probability to achieve desired goals;
It is most likely anticipated that an obvious requirement that entities contain is a system of internal controls. These requirements may include regulatory guidelines, contracting compliance provisions or simply fiduciary accountability.
The major responsibility for an internal audit always stays with management. However, the main obligation is usually ascribed to the forefront managers, while the board of directors and stakeholders are present for guidance and surveillance. The management of the organization must take this task very seriously or be ready to face consequent risk of loss of funding and contractual penalties where ever applicable.
Internal auditing is often described as an independent and impartial assurance, used for consulting activity premeditated to bring value and improve an organization’s actions. It also provides the business to achieve its purposes by delivering a systematic and well-ordered approach. This is to evaluate and enhance the efficacy of risk management, control and governance procedures. In other words, internal auditing is overall meant for monitoring the effectiveness of the internal control processes that have been traditionally inculcated by management.
Step – by – Step Planning for an Internal Audit:
- Planning: Detailed planning is the key to performing a successful internal audit. Commonly known factors like when, what and how will the audit be conducted. Most importantly, which part of the entity is going to be audited. The more the management spends time in planning a proper audit, the more flexibility will be seen in achieving good quality results and evocative audits.
- Preparation: The next step after planning is preparing. This includes constructing day to day operations. That is, when and which department or section, and/or quality will be evaluated and inspected. This step involves examining the results of internal audits performed previously.
- Perform: Once the required preparations have been made, it is time to perform the audit. This includes inspecting whether your association meets specific standards or requirements for certification or other necessary purposes. Auditors guise for evidence and collect information from a variety of sources, for example documentation, registration forms, personal annotations, and employee interviews. Once they’ve accumulated a record, then auditors begin their examination, calculation, and evaluation.
- Publishing: Once the internal auditors have finalized their audit, they publish all their conclusions in a report. This report pinpoints the issues deliberated and emphasizes on key areas for attention or improvement. The findings of this report are then delivered and discussed with the management.
- Pursue: The final phase involves following the measures suggested by the auditors.
Benefits of an Internal Audit:
Internal auditing adds value to your organization and its operations in many ways:
- Enhancement in business operations, this includes decrement in errors, and improved quality of performance.
- Improved efficiency, that is, exclusion of terminations, advancement towards automated processes, which allows accomplishments of tasks quicker than usual.
- Decreased cost, increased profit, improved cost recovery. This is achieved with the documentation of overpayment or overdues, and proper budget/cashflow management.
- Controlled risk management.
- Development of policy and procedures, for instance, the validation of documentation, and inclusion of any necessary details and data.
- Better management communication and clarity. Proper hierarchy and frequency of communication within the organizational structure.
- Increased regulatory compliance.
- Improvement in preparation of reports and workflows.
How can we help?
Spicer-Pegler works with companies large or small alike, where our experts are keen to design internal audit functions from conducting a comprehensive risk assessment across the organization, to communicating results to management and other stakeholders. Where our experts not only identifying problems, but also work on setting appropriate controls to make corporate managements able to face current and future challenges.