In today’s business world, companies need accurate financial and nonfinancial information to evaluate how well their business is operating. Information regarding the strength of a company’s internal control environment is crucial to fully evaluate its performance.
Internal audit services can be used throughout a company’s operations. The primary purpose of internal audit services is to help to identify and assess operational, financial and compliance risks that a company faces, and then to identify and assess the internal controls in place to mitigate those risks. Internal audit services involve both process and system reviews.
Furthermore, internal audit services can be used to identify areas for operational improvements within a company.
Areas of Focus Can Include:
- Facilitation of the risk assessment process with company management.
- Documentation of process and/or system flows.
- Assessment and testing of existing internal controls.
- Identification of internal control improvements in financial, operational and compliance areas.
- Performing a “best practices” review of your existing internal audit function to identify areas for improvement.
- Or, a combination of the above.
We can target specific processes based on requests from management and the audit committee, or we can review specific processes based on the results of your risk assessment.
Internal Audit Benefits Include:
- Assistance with management’s documentation and assessment of the internal control structure as required by the Sarbanes-Oxley Act.
- Assistance with management’s identification of significant risks to company operations.
- Identification of internal control weaknesses within a company’s control environment.
- Identification of problem areas in company operations.
- Reduction of waste and inefficiency.
- Development of comprehensive process/system documentation.
- Improved communications between operating units and company management.
Why add an internal audit function to your company?
The creation of an Internal Audit function is often viewed as a luxury by many companies, and one they cannot afford. But the truth is that an internal audit is actually a function most companies cannot afford not to have.
1. Independent assessment.
An internal audit function provides independent assessments for key processes and systems (and transactions) within a company. Since internal audit functions typically report to the audit committee of the board of directors, this helps to ensure that the audit committee and board as a whole has the information necessary to perform their roles effectively. It is often difficult for the audit committee to have its “feet on the ground” within a company. Internal audit is often the eyes and ears for the audit committee on a day-to-day basis.
2. Improved controls environment.
With an effective internal audit function participating in the monitoring of financial, operational and compliance areas of a company, the overall control environment will be improved. If process owners don’t believe their activities will be reviewed by internal audit, they may be less motivated to ensure that all related internal control activities are performed in accordance with senior management and Board directives. Furthermore, an internal audit function is often a deterrent for fraudulent activities.
3. Source of talent.
Finally, internal auditors typically review all key processes on a frequent basis and nonkey processes on a less frequent basis. As such, auditors develop detailed knowledge on how key processes and systems operate. Based on that alone, an internal audit function typically serves as an excellent talent pool from which key positions within the company may be filled. What’s more, internal auditors typically develop a “process” mindset. This enables them to see the big picture of how processes and systems work together, allowing them to see how what they do benefits the company as a whole. This should make them more valuable to the company in roles after they leave the IA function.
These are just a few of the benefits of utilizing an experienced, well equipped internal audit function. Most successful companies have internal audit functions. In fact, the New York Stock Exchange requires listed companies to have an internal audit function, and the NASDAQ has recently discussed the idea of adding a similar requirement.
There are a variety of ways to create an internal audit function — staffed entirely with internal resources, staffed with a mix of internal and external processionals, or fully outsourced to a professional services firm. Regardless of how you create it, your company will reap the benefits.
Featured Blog Posts
Provider Relief Fund and American Rescue Plan Reporting and Audits
Webinar: Retirement Plan Financial Statements
Top ways to keep 401(k) plan in compliance
Establishing and Maintaining an Effective Control Environment
Proactive companies use internal audit functions to help establish and maintain an effective control environment. They understand that internal audit not only provides significant knowledge and expertise in the areas of risk identification and control implementation, but it helps to communicate the importance of internal controls to personnel throughout the organization.
In addition, an internal audit function helps to promote continuous process improvement within all significant areas of a company’s operations – ultimately protecting shareholder value.