Reasons Why an Internal Audit is Necessary in a Company
Business owners often ask: is an internal audit necessary? What if we only run a small business and have limited resources to take internal audit programs? The obvious answer is "Yes" if your clients depend on you to provide compliant, efficient, and secure services.
There are many evaluations that we can get during internal auditing, such as how are we going to make improvements? is our business meeting our goals? Are there any gaps between our procedures and policies? Some of these questions are important for us to discuss for smooth business development.
Knowing about a few things is not enough to know the reasons why internal auditing is necessary. Let's take a look about the benefits of internal auditing, the main reason about the company's needs for internal audits, and the step-by-step to conduct internal audits.
Why Internal Audit is necessary for a company?
Audits will ascertain how risks are handled by the company, judging by whether the progress is in accordance with the business plan, and whether the procedures are carried out properly. If you use internal auditors, they will evaluate and check the controls a company has.
The role of internal auditors is to provide assurance in the company's risk management, internal control until it operates effectively, and to be a defense mechanism in detecting any violations in regulations, laws, and provisions of agreements and contracts.
Internal audit is necessary for bringing value and improving a company's actions. The main aim is to increase effectiveness and evaluate risk management. Internal auditing has everything about monitoring how the business develops through internal control which has been instilled by management.
Advantages of conducting internal audits
There are many benefits that you can get when a company conducts an internal audit. The main advantage is helping the management effectively. It will highlight any incorrect progress and rectify the progress that leads to improvement and get the process efficiency.
After the internal audits are well-performed, management has the opportunity to take appropriate decisions and review performance regarding operational improvement.
Not only for companies, but internal audits will keep employees alert about their jobdesk and improving their efficiency. Auditing can examine which areas need to be improved or eliminated to maximize the allocation of resources and be of full benefit to the organization.
There are many values that can be obtained after an organization carries out internal audits, which are:
- Decrement in business operations errors
- Improved business permormance quality
- Increased profit, cost recovery, dan decreased cost
- Controlled risk management
- Better communication to employees with appropriate hierarchy and clarity regarding duties and responsibilities
- Preparation of reports and workflows become more structured and efficient
After knowing the many benefits of conducting an audit, you need to have a step-by-step planning.
Step-by-step to conduct internal audits
- Detailed planning
Planning is the key to performing a successful audit. Several factors such as What, When, and How will the audit be must be prepared from the start. Choose whether you want to audit the whole or only part of the organization. The more time you have for planning a proper audit, the better quality and flexibility in the evocative audits.
After planning, the next step is preparation. Prepare the audit with constructing day operations. If you have many departments, choose which department to inspect and evaluate first. The preparation step involves the results from previous internal audits and examining them with the current results.
- Perform the audit
After the preparation is complete, do the audit. Carry out inspections and determine whether the organization meets the standards or requirements to meet the purposes or necessary certification. Auditors will collect information and look for evidence from several sources, such as employee interviews, documentation, or forms. After the auditors accumulated a record, they will begin calculation, examination and evaluation.
Wait until the internal auditors have finalized their audit. They will publish the conclusions in a report. The report will pinpoint all the issues deliberated and emphasized on areas that need to be corrected, paid attention to, and require development. The results of the audit report will be delivered and discussed with management.
Auditors will make suggestions and measurements as a final phase, then management can start implementing areas that need improvement.
Conducting audits should not be too infrequent, because there must be comparisons between previous audits and recent results. If you don't conduct audits regularly, then management cannot find which areas are problematic or need corrections. So, the more problems there are in an organization, the more it makes sense to audit more frequently until a solution is found and changes are implemented effectively.
If you already understand how an audit has a big impact on a company, you can hire professional auditors like Smebrother and carry out company improvements as fast as possible.