Internal Auditing
With the changing environment, organizations are reinventing and restructuring themselves to change their processes and goals to respond to these changes. With the increasing competitiveness and transition in all market segments, organizations seek to improve their management tools and methods and find productivity gains.
Due to this scenario, the audit functionality has come in handy to increase and intervene in the diagnosis of the various organizational situations such as effectiveness, efficiency, and viability of processes and controls while preventing illegal and fraud acts.
From this perspective, we can say that the role of internal auditing has emerged to be the ideal reflection of the expectations and needs of the organizations as a whole to thrive and survive in the markets.
The Institute of Internal Auditors describes internal audit as a consulting activity-independent and objective towards value addition and the improvement of organizational operations to achieve the set objectives in a more disciplined and systematic approach. It does this by evaluating the process effectiveness of risk management, governance, and control.
In this sense, the internal audit is seen as a chief tool for supporting the top management and helping the organizations achieve their objectives. The main aim of these internal audit activities is to operate as strategic management partners that give companies the chance to serve as consultants and advisors in proposing possible strategies and identifying risks to enable the company’s best performance within the segment.
Evaluating Your Company’s Operating Procedures
By conducting the internal audits, this could be one great way of revealing cost-cutting solutions that could help both small and large scale companies within the ever jerking financial and cash flow crisis. Here are thus some of the rips that one can use an internal audit to rationalize the company’s operational procedures.
Introduction of your internal audit concepts
It is crucial setting up the audit concepts in your company’s employee handbook from the beginning. In this case, your company has a group of employees who have worked with you for many years. Suddenly the executives settle on doing their ultimate internal audits. This could create a negative repercussion in morale. First, all you need to do is add the audit concept to the handbook and explain it further. Elucidate how these audits are going to benefit the employees as well as the company at large.
Clearly and correctly communicate your standard operating procedures in your employee handbook
By doing this, your employees will know what is needed for their performances and help you save a lot of money and time. This is because you will first have to evaluate how your current ways of doing things will appear on paper. Most of the time, you will get to realize that some of the stages and phases were not addressed enough. By crossing all your differences, this will make it easier to run your on-site assessments.
Designate at least one or two supervisors or managers to devote their full time towards the auditing project
Conducting internal audits is a big project requiring the right foreman to ensure the successful implementation of what is needed. Do not expect that your line workers will double their duties as internal audit project supervisors.
Consider hiring an outside consultant.
Preferably, it is sufficient for companies to contract outside consultants for their blend and perspectives most of the time, you will find out that people do things the usual way just like it is always done. But with the aid of the outside consultants, there are no biases or preconceived notions that could impact decision-making.
The thing is that internal audits are the best ways of taking a few steps to have a look at the overall performance of the company. They do reveal the company’s overall efficiency and effectiveness, the king in today’s down economy.
Advantages of Internal Audits
Internal auditing has several advantages. But the main advantage is that it helps identify errors before embarking on the external audit. This makes it possible for the management to rectify all the mistakes that could be present before the external audit happens. In this way, this has helped reduce fraud as management could not be able to go through everything as auditors who are the right professionals could efficiently deal with the mistakes and wrong deeds.
The other thing is that the internal audit plays a great role in helping the management by making decisions and keeping management in check. Most of the time, businesses will achieve their objectives through internal audits, internal checks, and proper internal control. Management can also be able to use the previous years’ audit reports to ascertain the organization’s progress. From this, they could be able to make effective decisions by making the right comparisons. The management could also use internal audits to make necessary changes that could enhance the company’s better functionality.
Internal auditing can as well help in the fixing of the division of responsibilities and labor. When carrying out the internal audits, the activities of each employee are typically looked over. Where the necessity arises, the auditors could point out if there is any need for the separation of labor for a particular task. When this happens, then the division of labor will occur as responsibilities will be assigned to those employees who tend to idle.
Through the internal audit, asset protection could be made possible. Most of the time, you can find out that company managers are misusing their assets for their own private needs and not for generating income. But through the internal auditing process, the stock inventory, cash, and the other assets could be put to proper use ensuring business income generation. Also, it could help ensure maximum utilization of resources that could lead to increased costs for the organization.
Regardless of the organization size, the type of industry that your company specializes in, carrying out internal audits, could help in computing the overall functionality of the business. It does not matter if your business is smaller; all businesses are susceptible to risks. All you need is carrying out an informed internal audit process, and you will be able to achieve your goals.
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