At Pasquesi Sheppard, we often speak with people who are unaware of the benefits an internal audit can have for their business. To help with this, we put together a brief article that describes what internal audits are and explains some of their most important benefits. If you’re curious, keep reading to learn more about how an internal audit can help your business.
What Is an Internal Audit?
Audit by SurveyHacks licensed under CC BY 2.0
An internal audit is a review of an organization’s processes usually carried out by an independent professional or team of professionals. The goal of an internal audit is to evaluate the efficiency, security, and integrity of a company’s operations. This process can be used as a tool for identifying challenges and pursuing improvement.
Internal audits usually involve three stages: observation, reporting, and review. The first stage involves gathering information on a business’s operations by collecting internal documents, observing processes, and sometimes interviewing employees. This process gives auditors the tools they need to assess a company’s performance.
Reporting is the second stage of the auditing process and involves compiling all the relevant data collected in the first stage into a report. The report usually includes a brief overview of the auditing process, a summary of all relevant findings, and a set of recommendations for overcoming any obstacles the organization faces. After the reporting phase, the audit enters the review phase, in which they look and the findings and recommendations of auditors and implement new policies.
Ways an Internal Audit Can Help Your Business
Now that you know what an internal audit is, you may be wondering how hiring a team of auditors can help your business. Here is a list of benefits that your company can gain from an internal audit.
Enhanced Compliance
All companies are subject to a range of legal regulations, such as labor laws and financial reporting statutes. Many industries also have standards that govern business conduct within the field. An internal audit can be a great way to check your company’s legal and industry compliance. A team of auditors can review your internal processes and policies, gauge your compliance, and provide a set of recommendations to fix any issues. This can help your business avoid scrutiny and operational hold-ups.
Risk Mitigation
If you run a business, you know that it’s important to protect your vital assets. Although all businesses try to implement safeguards, their protocols and processes may leave vulnerabilities. One of the best ways to look for potential risks to your assets is to conduct an internal audit. Auditors can review your company’s protocols and security measures, look for vulnerabilities, and recommend solutions to keep your assets secure.
Improved Efficiency
In order to reach their long-term goals, businesses need to pursue productivity while preserving their resources. In some cases, businesses may have redundancies within their processes that cause them to waste capital, labor, and other resources. They may also experience operational gaps, which are areas of missed opportunity or insufficient oversight. If you want to avoid these risks and optimize your business for greater efficiency, consider hiring a team of auditors to review your company’s operational performance. They can help spot missed opportunities, leadership gaps, overspending, redundancy, and other inefficiencies.
Controls Assessment
Internal controls are processes implemented by business leaders to ensure operational success. They help protect companies from risk and ensure that each part of a business can achieve its objectives. One of the primary reasons that business leaders choose to hire auditors is to review their operational controls. An internal audit can evaluate the design of your company’s controls, as well as their implementation. If they aren’t serving their purpose, auditors can help leaders modify and improve their companies’ control environment.
Independent Insights
When working in the same environment every day, it may be difficult to analyze the health of your business objectively. Hiring external auditors can be a good way to get a better picture of your operations from an independent point of view. Auditors have worked with a variety of other clients and have seen both successful and unsuccessful approaches to business operations. This experience makes them experts in identifying challenges to corporate success and can help them develop effective solutions for your enterprise.
Greater Integrity and Better Public Image
Although we all strive for integrity in business, sometimes cases of lack of integrity occur. These can occur because of employee indiscretions or by accident. If a company suffers from a lack of integrity, it can harm its operations and cause serious public relations issues. A simple way to increase integrity within your business is to conduct regular audits of your processes. Auditors will analyze your operations and especially your financial reporting to ensure that your company is legally and ethically compliant. Taking this simple step is a good way to preserve your company’s public image and values.
Stronger Cybersecurity
Technology is now an integral part of business, with many companies using a large stack of software applications to manage their operations. Customer and internal data are also vital for ensuring corporate success, and many firms manage extensive databases containing sensitive information. Because of these factors, cybersecurity is one of the most important considerations for companies in all sectors.
If you are concerned about your company’s cybersecurity, or if you want to improve an already great system, it may be helpful to audit your operations. During an internal audit, independent professionals can screen your tech environment for safety by evaluating your protocols, ensuring compliance, and identifying any security gaps.
That’s our roundup of the important benefits that an internal audit can have for your business. We hope you came away with a better understanding of the auditing process and the value it provides to companies like yours. At Pasquesi Sheppard, we’d love to help you with your auditing needs, as well as any other financial needs your business may have. You can explore our auditing services if you’re in the Lake Forest area. Feel free to contact us at any time if you have questions about our services. We look forward to hearing from you.