internal audit

Top 5 Elements of an Effective Internal Audit Process

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“One sure way to increase a business’s profits is to implement a process improvement program. When a business audits its internal processes and extracts waste from those processes, the result is inevitably more time or money being left over.” These are the words of Hendrith Vanlon Smith Jr, CEO Mayflower-Plymouth.

Companies must plan appropriately to avoid failure and unsuccessful financial reports for an internal audit to be successful. In addition, effective internal auditing means external audits will be easier to execute. So what does it take to perform an effective audit process in your company? For an effective audit, there are some important points one needs to consider.

The 5 Elements of Successful Audit

Audits are more than a quick check into your organisation. Internal auditing becomes an excellent tool for boosting company growth and improvement if done correctly. So before planning the next audit, ensure the following are in check:

  1. Clear Goals

Setting clear goals helps organisations get more value from internal audits. It helps to clarify what you want to achieve from the audit. Then, creating an audit plan becomes more manageable. The following questions help put things into perspective:

  • What will the audit entail?

  • What is the main reason for the audit?

  • Do I want to improve processes, cut costs, or avoid risks?

  1. Setting Priorities

Internal auditing involves going through tons of information. This takes time, especially if you must identify and solve issues immediately. Hence, recognise components that need immediate attention so the auditor can focus on those before doing anything else.

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  1. Clear Communication

Auditors and auditees must maintain a clear communication channel to increase efficiency. You must communicate your fears and desires before and during auditing to ensure everything goes well. While the auditor has skills in identifying financial issues, the information you provide goes a long way to make the processes easier.

  1. Authority

Always get a business advisor that asserts authority during auditing. At the same time, you must establish a support system throughout the organisation, from the managers to employees. This makes work easier for auditors. Again, you cannot overlook the importance of hiring an auditor with the following qualities:

  • Honesty

  • Diplomacy

  • Cultural sensitivity

  • Perseverance

  1. Identifying Stakeholders

Determining who’s involved before beginning helps establish the scope of the audit. It must be clear how many employees, sites, or departments the audit includes. The main advantage of identifying stakeholders is to improve planning. You discover how long it will take to cover all departments and deliver reports.

The Best Internal Audit Strategies for Success

Internal auditing can be as effective as an external audit if done correctly. Ultimately, the process suggests improvements to help your organisation grow and avoid legal issues. Implementing these strategies assures a smooth and effective auditing process:

  1. Planning

Preparing before the audit starts helps identify deadlines and ways to meet them. The auditor must also alert the team they are auditing and explain the benefits during this stage. It also helps to alert the team of the resources and access to systems needed throughout the audit. Eventually, planning reassures the auditees and ensures the auditor has everything they need to get accurate results.

  1. Engaging with the Organisation

An auditor must engage with the organisation instead of popping up only when conducting the audit. Turning up once a year does not help achieve the best results. Instead, auditors must communicate often, clearly explain audit objectives, and report the outcomes to everyone in the company. Doing so makes everyone feel like part of the team.

  1. Establishing Key Controls

Risk assessment makes it possible to identify risks and how to manage them. You determine key controls by identifying the organisation’s risk management strategies, measuring financial controls, or weighing sustainability practices.

  1. Accurate and Proactive Reporting

An audit report is the most critical part of an internal audit. However, auditors must start writing it when they begin the audit instead of doing so at the end. Once you gather the data, compiling a report leads to omitting important information and details that make the report well-rounded and comprehensive.

  1. Agility and Inclusivity

Audits are time bound, and the deadlines might lead to non-inclusive, strict processes. The disadvantage is that employees, or stakeholders, feel left out of the audit process. Fortunately, the approach’s agility makes the stakeholders feel like business partners. So they play a consultative role in audits, helping auditors improve risk management.

On top of that, being agile helps gain the team’s trust, respect, and support. Eventually, the process becomes smoother and the results more accurate since everyone on board is working towards the same goal.

Conclusion

Internal auditing should be an intrinsic part of every organisation’s corporate strategy. Besides, doing internal audits once yearly does not cut it. If getting an auditing software, firm, or both suits you, do so to ensure a failure-proof audit plan and process occurs. However, successful audits must have all the five elements mentioned above, so always stick to them.

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