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Internal Audits - Look Inward to Build Efficiency Within

Internal Audits - Look Inward to Build Efficiency Within

What is an Internal Audit?

An internal audit is a systematic review of a company's internal processes and systems, conducted by the company's own staff, to assess their efficiency, effectiveness, and compliance with relevant standards.

The purpose of an internal audit is to identify areas for improvement, identify potential risks or issues, and recommend changes to improve the overall performance of the organization.

Internal audits can focus on a specific area of the business, such as financial reporting or supply chain management, or be more general in nature. They can be conducted on a regular basis or as needed, depending on the needs of the organization.

Reasons a Company Should Conduct an Internal Audit

Identify Inefficient or Ineffective Areas of the Business

It can be hard to fix problem areas of your business that you don’t know about. An internal audit can show you trouble areas you may not have been aware of.

Identify Risks or Issues Within the Company's Processes and Systems

An internal audit is a great way to find issues in your company that could lead to significant problems if not corrected.

Improve Customer Satisfaction

Identify and addressing any bottlenecks or delays in your processes that would affect the customer experience.

Eliminate Waste and Inefficiencies

Reduce costs and increase profitability by identifying ways to streamline processes to reduce waste and increase efficiency.

Ensure Compliance with Relevant Standards and Best Practices

It is vital for a company to be compliant with all standards and best practices relevant to their company. An audit can help ensure compliance.

Foster Continuous Improvement and Innovation

An internal audit can empower employees to give thoughts and ideas that can benefit the company.

Improve Communication and Coordination

Do different departments and teams within your company communicate effectively? An internal audit can help identify communications methods used within your company and help determine ways to improve efficiency within departments.

Prepare for External Audits or Regulatory Inspections

An internal audit is a great way for your company to stay in compliance and ready for any future external audits or inspections.

Benefits of an Internal Audit

  • Improved efficiency and effectiveness of internal processes and systems
  • Increased profitability through the identification and elimination of waste or inefficiencies
  • Enhanced customer satisfaction through improved processes and services
  • Reduced risk of operational errors or issues
  • Improved compliance with relevant standards and regulations
  • Enhanced communication and coordination within the organization
  • Increased transparency and accountability to stakeholders
  • Fostering a culture of continuous improvement and innovation within the organization.

Internal Audit Checklist

Below is a checklist companies can use when conducting an internal audit. These steps are general in nature, and can change based on company size, industry, and any specific regulations that must be followed.

1. Identify the Scope of the Audit

Create a detailed list of the departments, processes, and systems that will be reviewed to ensure all parties know what is being audited.

2. Review Policies, Procedures, and Documents

Any relevant documents must be reviewed to ensure they are up-to-date and comply with relevant laws and regulations.

3. Assemble a Team of Employees to Assist with the Audit

When assembling this team, make sure those selected have the necessary expertise in the areas they will be reviewing.

4. Identify Potential Internal Control Weaknesses

Any risks or weaknesses found during an internal audit must be documented and plans developed for correcting any issues.

5. Prepare Relevant Documents and Records

Have these documents ready for review by internal auditors, including financial statements, contracts, and policies.

6. Communicate the Audit Schedule

Make sure employees and stakeholders are aware of the audit schedule and plans.

7. Provide Timely Responses to Requests

To help the audit process go smoothly, cooperate with auditors by replying quickly to requests for information.

8. Review the Audit Report

After the completion of the internal audit, review the report and look at ways to implement recommendations and take corrective actions where needed.

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Look Inside For Improvement Opportunities

Internal audits are a valuable tool for companies looking to improve the efficiency, effectiveness, and compliance of their internal processes and systems.

Conducting an internal audit allows businesses to identify areas for improvement, mitigate potential risks, and make changes to enhance performance and profitability.

If you have questions on how to conduct an internal audit on your business or would like an outside organization to conduct your audit, contact one of our professionals today.

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Biz Tip Topic Expert: Rebecca Muehl, CPA

Rebecca Muehl, CPA

Rebecca is a Senior Manager with SVA Certified Public Accountants specializing in assurance services including audits, reviews, compilations, and agreed-upon procedures engagements for closely-held businesses of varying sizes.

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