4 Benefits of Internal Auditing
Do you want to save your company time and money? Do you want your operations running like a well-oiled machine? Do you want to make sure your business follows industry rules and regulation and protect it from fraudulent practices? Do you want to be able to tell your board of directors that the company's internal controls are working as they should? Then you need internal auditing.
Internal audits provide so many benefits that we could write a whole book. Nevertheless, we'll try to keep it brief. But first, what is an internal audit?
An internal audit essentially evaluates the effectiveness of an organization's internal controls. An internal auditor uses tools like audit management software to review your internal controls and their results, analyze the data and act as an objective consultant, providing you with valuable recommendations on where and how you can make improvements. They can protect the company from risks, errors and fraud, helping the management team maintain integrity and accountability.
Compliance with Standards and Regulations
One of the most important benefits of conducting internal audits is that through them you can detect and correct problems before they're uncovered by external audits which would result in costly fines and other types of sanction. Any business has to comply with a set of specific standards and regulations pertaining to their industry. Keep in mind that laws can change and regulatory bodies are not required to make sure every business owner or manager stays up to date. This is considered their responsibility.
So if you want to have the confidence that you can pass any external audit, avoid sanctions and protect your company's reputation, you'll need to conduct regular internal audits.
In the context of internal auditing, a risk is any action or event that could have an adverse effect on the company. This could mean changes in regulations, industry standards, management, operations, alliances and capital sources. The data obtained through internal audits and audit management software can be used to predict the consequences of these factors and help the management team come up with strategies to mitigate risk.
We live in the digital age, and this means that you need to allocate resources to protect your company's computer systems against data breaches. As part of the internal audit, you can conduct "white hat tests" to detect vulnerabilities in your network architecture, so you are better prepared to ward off attacks. These tests determine whether the layers of internal data security are sufficient and if you have to correct SQL injections, problematic software or server settings.
Increase Operational Efficiency
As we mentioned before, internal auditing serves to evaluate how effective a company's internal controls are. The data generated by an internal audit will let you know if your existing regulations and procedures truly reflect company culture and if they are the best choice for helping the company achieve its long-term goals.
Since regular audits ensure the continuous monitoring of these processes, it's much easier to spot problem areas and determine what changes would increase operational efficiency. This cyclical optimization makes your company's success rely more on process than on people, which is far more reliable.