Why is Internal Audit Beneficial for business?

Dec 2020

Auditing is essential for every business. It is a systematic approach that includes evaluation of the various aspects of the business such as operations, finance, production and administration and various other departments. There are two ways of conducting an audit. It can either be done internally by an employee of the company or externally through a third party agency. Most businesses prefer internal audit as it ensures the safety of business information and prevents data breach.

Internal auditing is usually the first approach by an organisation to keep a quality check on financial records, internal processes, rules, norms and regulations. External Auditing, on the other hand, requires availing services through an external organisation or a third party agency. Auditing involves monitoring specific factors to ensure an easier flow in the business activities and also ensures that there are not hindrances to the auditing process. Some of the critical elements for evaluation are the flow of business operations, systems that exist within an organisation and actions taken by the management towards specific business goals.

Here are some of the roles which have to be played by the internal auditor: 

Role of an Internal Auditor

An internal auditor is usually an employee of the organisation that requires auditing. The management either hires an auditing professional as an employee or relies on one of its existing members. The responsibilities of an internal auditor include:

  1. Business process assessment

The primary task of auditing involves evaluating the flow of operations. It requires a proper understanding of the business processes and various pitfalls associated with them. The key here is to identify problems that cause a lag in business operations so that the experts can figure out a better and suitable solution.

  1. Evaluating performance

The internal auditor should assess the performance across various departments of the organisation. It also involves assessing the internal controls and suggesting improvements. Performance evaluation helps in identifying drawbacks in the business process and improving the efficiency of the organisation.

  1. Improve communications within the organisation:

An organisation can become more efficient if the communication between teams keeps improving. An auditor can help in bringing in more transparency within the business that will, in turn, allow better communication and coordination in the organisation. 

Features of Internal Auditing

With an internal auditing service, you can ensure the better functioning of your business. Auditing is an efficient way of understanding business risks and suitable solutions. Some of the features of internal auditing include:

  • Risk assessment
  • Systematic procedures
  • Documentation
  • Performance Testing
  • Reporting 

Benefits of Internal Auditing

The following are some of the benefits of implementing internal audit in your business:

  • The scope and objectives of the audit process are defined by management and not by external agencies.
  • Reports generated are directly shown to management without interference from external agencies.
  • Successful implementation of the audit process increases accountability within the organisation.
  • Auditing helps in the identification of anomalies and shortcomings of the organisation.
  • It serves as an early warning system and provides actionable steps to overcome complex business problems. 

How does Internal Auditing add value to a business?

Including the internal audit process in your business activities can turn out to be quite beneficial in the long term. The following are some of the ways in which having an internal audit can add value to your business:

  • It increases the overall efficiency of the company.
  • Auditing helps in the improvement of business operations and workflow.
  • It provides suggestions for limiting expenses that are not required and working towards profitability.
  • It ensures transparency in business and guides the decision-making process.
  • It determines the future objectives of the organisation and identifies various short-term and long-term goals. 

Getting started with Internal Audit

With great benefits from internal auditing, organisations should adopt the practice in their business activities. To get started with an internal audit, the management is required to appoint someone to carry out the process efficiently. The most crucial part of the auditing process is to plan and implement it to generate audit reports. During the planning process, scope and objectives are defined with compliance to policies, regulations and industry standards.

Once the Audit Plan is prepared, it is implemented for performance evaluation and documentation. The latter part involves making audit reports based on the information obtained from previous observations. The auditor can draw necessary conclusions from the reports and present them to the management to take the required actions. The auditing process can take a further step if follow-up is done by the auditor to ensure better functioning of the business. 

How can we help?

Internal auditing is one of the most important business activities and should be conducted regularly to ensure a smooth flow of operations within an organisation. The most efficient way of getting started with an audit is by consulting an expert auditing firm that will guide you with the auditing procedure.

Here at JAXA Chartered Accountants, we provide complete assistance with auditing and accounting services for businesses. The experts at our firm will ensure that the advice provided to you is suitable for your business and will assist you in making your business more profitable. Contact us today to know more about our audit services!