If you’re not quite there yet, understanding the benefits of internal audits is a good starting point.

An Overview of Internal Audits

Internal audits are an independent assurance activity. The goal of an internal audit, broadly, is to improve your operations and add value. When you undergo regular internal audits, you’re then identifying strategic ways to improve governance processes, control, and risk management.

According to the International Professional Practices Framework, internal auditing is an independent consulting undertaking.

Independent auditors work to provide unbiased reviews of systems, organizations, and processes within a business. Then, the senior executives can gain insight. Internal auditors might cover all areas of a business, or they could specialize in certain areas.

Ultimately, the goal is to identify weaknesses, so they can be remedied before they cause harm.

External audits are done usually by members of a CPA firm, by contrast, and the results are reported to those outside the company and shareholders. External audits focus on financial reports, and they’re done annually. An internal audit can be done at any interval that an organization finds reasonable and beneficial.

Below are some of the specific benefits of internal audits.

Internal Audits Give the Opportunity to Make Corrections to Processes

Company leaders and IT teams probably have procedures that they put in place, but whether or not those are being followed can be more ambiguous. You want to make sure that your goals are aligned with your procedures and then that there’s a sense of consistency in how these procedures are being followed.

When they’re not, an internal audit can give the opportunity to correct the issues accordingly.

Risk Assessment

Internal audits are broadly beneficial in terms of risk assessment.

With audits, you can prioritize projects based on the level of possible risk.

An internal audit may create the opportunity to make organizational changes that would help protect against risk.

Efficiency

With regular internal audits, you’re giving yourself the chance to see redundancies in your practices, governance, and procedures. This can then help with the creation of practices that will save time and money.

Decision-Making

Management can use the independent, unbiased information gathered during an internal audit to support data-based decision-making.

Governmental Regulations

There are regulations, laws, and statutes that businesses have to comply with. These become complex, and they also come from every level including local, state and federal regulations.

Business owners need to stay ahead of these regulations, and they can and often do change. Regular internal audits can ensure compliance and help a business avoid sanctions and fines.

Types of Internal Audits

Beyond understanding the general benefits of internal audits, it’s valuable to know there are actually different types. Most internal audits do focus on things like accounting procedures and financial statements, but there are others, including:

• Compliance audits ensure that an organization is staying up-to-date as far as compliance with laws and regulations to avoid fines.
• Environmental audits look at the operational impact of a company on the environment, and this can include regulatory compliance as well.
• IT audits are becoming a priority for many businesses because their IT architecture is becoming more complex and dispersed, and cybersecurity threats are simultaneously growing. IT audits look at the infrastructure to ensure security, and these internal audits will also often look at backup and recovery.
• Performance audits look at whether an organization is meeting the goals that are outlined by the Board of Directors.

The Internal Audit Process

Most internal audits follow a process that includes a few main phases.

During the planning phase, an internal audit team defines the scope of their work and their objectives. They might look over previously completed audits, create a budget and timeline, and then have a meeting where they officially begin the audit.

Fieldwork is the audit itself. Document and controls might be reviewed, work might be reviewed as well, and recommendations could be identified during this time, if relevant.

The reporting phase is when things are written out after they’re uncovered in the audit. During the reporting phase, it’s important that the information provided is digestible by the particular audience.

The final stage of an internal audit is follow-up. This is when the audit team makes sure their recommendations have been appropriately implemented and that goals have been met as such.