Do you feel as though your business could be operating better and spending less money?
Chances are it could be. With the correct assessment of your operations, it will be possible to make recommendations for change.
Auditing is carried out to inspect the workings of an organization officially. An internal audit is carefully designed to be an objective activity that adds value and aids the improvement of the organization’s operations.
An internal audit assures that the governance, risk management, and operations are all efficient. But what does an internal audit entail, and what is the importance of evaluating an internal audit department?
In this article, we’ll take a look at how internal auditors are used within organizations.
What Is the Purpose of an Internal Audit?
Audits serve multiple purposes. They take stock of the current operations and suggest areas of improvement.
There are several areas in which an internal audit is beneficial.
Detecting Theft and Fraud
Every year, businesses lose money through theft and fraud. This could be internal or external. Types of theft and fraud commonly found in industries include:
- Employees skimming payments
- Company credit card misuse
- Payroll fraud
- Cash theft
- Tampering with checks
- Stock theft
Whether you suspect that your employees are engaged in activities such as these or not, you must have a robust strategy for auditing your company finances that will bring such behavior to account.
While audits are useful for detecting fraud, they can also be used to highlight other losses. For example, you may extend lines of credit to customers or handle stock. These are both areas that need monitoring and auditing.
An operational audit examines and measures the practices of a company. Inefficient procedures add to your company’s overheads without improving profits.
An operational audit will highlight these inefficiencies, thus allowing you to rectify them in the future.
Carrying Out Your Internal Audit
An independent auditor should carry out internal audits. It is essential that an auditor remains impartial and works separately to the day-to-day running of your organization.
You should consider carrying out an audit at least once a year. You may wish to hold audits on a more regular basis in areas of the business that are of concern or where remedial action is underway.
Using internal audit software will help to improve the efficiency of your audit practices.
You should also consider the importance of excellent communication for an internal auditor. Auditors need to feedback their findings clearly and constructively.
What Is the Importance of an Internal Audit?
A full and thorough internal audit is essential because it thoroughly tests all of the procedures and practices that you have in place. It identifies issues in the current operations, and it highlights areas for improvement.
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