Planning to perform an internal audit? Here’s what you need to know before assigning someone to the task.
Internal Auditor Job Description
An internal auditor, related to quality management systems, evaluates an organization’s operational activities to ensure compliance and peak performance. When conducting internal audits, the auditor assesses activities and procedures, including those related to:
- Risk management
- Internal control
- Quality management
Internal auditors often report to the senior management or board of directors. The specific responsibilities of an internal auditor vary depending on the size and structure of the organization they are auditing. However, there are some common duties that internal auditors typically perform, such as:
- Evaluating the adequacy and effectiveness of internal controls
- Identifying control deficiencies, as well as risk, and recommending corrective action
- Assessing compliance with applicable requirements, regulations, and company policies
- Conducting special investigations into allegations of fraud, waste, or abuse
- Assisting management in the development and implementation of new policies and procedures
- Providing training on internal control and risk management processes
- Monitoring compliance with corrective actions recommended in previous audit reports
- Reporting findings and making recommendations to improve the organization’s operations, control environment, and risk management processes
- Presenting recommendations to senior management or the board of directors
Role of Internal Auditor
Organizations use internal audits to assess risk, ensure compliance, and identify areas of improvement. The internal auditor is responsible for completing a thorough audit that adequately evaluates a company’s operations in advance of an external audit.
While you may be able to find an internal audit checklist online, it is important to be wary of these resources. An internal auditor will be able to dig deeper into your organization’s activities, better identify risks and inefficiencies, and provide more tailored recommendations for improvement than an untrained auditor or a generic checklist.
Internal Vs External Audit
Both types of audit are objective assessment of an organization’s risk management, control, and/or governance systems. However, internal and external audits are distinct. The main differences relate to:
- Who conducts the audit
- Who receives the audit report
- What the audit covers
- Why the audit is performed
What Is An Internal Audit?
Internal audits are relatively informal evaluations that serve to assess the effectiveness and compliance of an organization’s operations, often from a more holistic viewpoint. These audits give organizations the opportunity to see where they are excelling and where they can improve.
While some companies have internal auditors among their staff, it is important to use professionals who have the proper training. Hiring qualified auditors for your internal audit can be a great investment if you do not have the time, resources, or trained staff to complete the audit on your own, or if you are looking for a truly unbiased perspective.
What Is An External Audit?
Though similar in practice, external audits have a few key differences. An external audit is always conducted by an independent auditor outside of the organization. This process is more formal than an internal audit and is used to determine whether an organization keeps accurate records, and is compliant with relevant regulations.
Where an internal audit looks for areas to improve, an external audit evaluates an organization on its accuracy, risk management, and compliance, often to reassure shareholders, investors, and other relevant parties that the company is in good standing. Getting certified to standards such as ISO 9001 also requires an external audit.
Internal Audit Process
There is no standard process for conducting internal audits. However, successful audits typically incorporate some form of the following phases.
Before conducting an internal audit, it is important to be proactive and plan ahead. Some things to consider include:
- What processes and activities you want to audit
- How often you want to conduct audits
- What questions you want to ask
- Who will be involved
- When you will perform these audits
Be sure to define aspects of the audit such as scope, objectives, and methodology, as well.
During this phase, an internal auditor or auditing team will collect, organize, and assess relevant information and data which they will use to complete the audit. Obtaining this information may entail:
- Interviewing staff
- Reviewing documents
- Testing controls
- Documenting work performed
- Identifying exceptions
- Generating recommendations
- Following up on previous findings
The report an auditor prepares should be clear and succinct to avoid miscommunication. In this report, the auditor should document their findings alongside actionable recommendations.
Implementation & Follow-Up
After filing the finished report, it is important to ensure that the recommendations made are implemented. Following up on the final report of your internal audit will better ensure necessary changes are made for the sake of improving your processes.
Value of an Internal Audit
An internal audit is an important tool that can be used by organizations to improve their operations and protect their assets. Internal audits ensure that an organization’s processes, operations, and activities are functioning effectively. Additionally, internal audits can help identify potential risks and recommend ways to mitigate them.
The value of an internal audit depends on the skills and knowledge of the auditor, as well as the quality of the audit process. When conducted correctly, internal audits can provide significant benefits to organizations.
Don’t just check off boxes; get the insight you need to make meaningful changes in your operations.
If your company doesn’t have a properly trained internal auditor, you can outsource this work to a trusted organization with qualified auditors, like Ledge. Our experienced internal auditing team can help you identify weaknesses and provide expert recommendations to help you improve your organization.
Frequently Asked Questions About Internal Auditors
What is the purpose of auditing?
The purpose of auditing is to provide objective assurance that an organization’s risk management, control, and governance systems are functioning effectively. Additionally, audits can help identify potential risks and recommend ways to mitigate them.
What does an internal auditor do?
An internal auditor’s duties include reviewing and evaluating the adequacy and effectiveness of internal controls, assessing compliance with laws and regulations, and reporting findings to senior management or the board of directors. Additionally, an internal auditor may assist management in the development and implementation of new policies and procedures.
Who should perform an internal audit?
Internal audits should be conducted by qualified auditors who have the skills and knowledge necessary to evaluate an organization’s risks, controls, and governance processes. Organizations may have trained auditors on their teams, or they may outsource internal audits with the use of qualified auditors from organizations like Ledge.