For many, the words “internal” and “audit” elicit immediate concern, worry, and panic. Like most fear-related responses, most people don’t grasp an internal audit’s actual process and goals. The only times they hear those words are most often associated with systems like the IRS for most uninformed individuals. But plenty of companies perform internal audits utilizing either internal resources or third parties. Here are a few key concepts required to understand an internal audit to dispel concerns, myths, and fears surrounding audits.
Goals and Purpose
An internal audit’s primary goal is to assess a business’s internal controls: Accounting and Governance included. These evaluations also determine if a company behaves according to federal, state, local, and potentially international law. Internal audits, of course, are critical, and that significantly adds to the intimidating nature of the experience. It’s imperative to remember that internal audits are superb tools for holding individuals and departments accountable to their goals while simultaneously developing risk assessment portfolios and projections for how to operate moving forward. Further, assuming your company acts within the law, the fear of finding operations outside of legal compliance shouldn’t be a necessity. This is of particular importance because the Sarbanes-Oxley act federally mandates all businesses to be legally accountable for their financial statements’ accuracy.
More often than not, an audit is performed by an external company. Usually, a team of auditors trained explicitly in determining your compliance and internal controls. Auditors specifically want to disrupt as little as possible if they are doing their job correctly. They will begin with indirect research: looking at company information via charts, graphs, etc. Sometimes those statistics are enough for a review board to assess the company, and sometimes discrepancies information require direct research via interviewing employees. It’s imperative to realize that this process is for the company’s betterment and is intended not as a punitive exercise but a corrective measure.
How Is The Info Conveyed?
Most commonly, the information merged in an audit disseminates itself in both formal and informal manner. A final report of the auditing team’s entire findings will be developed with tremendous depth and detail. That final report will also often have a summary or a memo produced as a forward to it, which can be more easily shared with a mass of people to understand its direction, is taking and might take projecting into the future.
While audits can seem intimidating at the moment, it’s ultimately always a good idea to have inspections to shine lights on problems people within the company might not see, be aware of, or even know are happening. Ultimately audits are another vital tool for securing the safety and future of a company and its employees instead of a threat to the companies’ safety.