An internal audit team is responsible for assessing the effectiveness of an organization’s internal controls. This is achieved through internal audits that review your organization’s records, like financial statements and other data that gets reviewed by governing bodies for the purpose of identifying data inaccuracies and employee theft.
Does your organization have an internal audit team? There’s a whole month dedicated to celebrating Internal Audit Awareness, and now is the perfect time to celebrate auditing professionals and help your employees understand the impact your internal audit team has on the company.
If you don’t have an auditing team yet, this article will help you understand why an internal audit team is essential.
What are the different types of internal audits?
There are several types of internal audits that are beneficial to your organization:
· Financial audit
· Compliance audit
· Performance audit
· IT audit
· Environmental audit
· Operational audit
All internal audits are important, but financial, compliance, and environmental audits are especially critical since these aspects of business are generally regulated.
For large companies in the European Union, environmental reporting is about to become mandatory under the CSRD. If you don’t have an internal audit team, there’s a big chance you’ll find yourself in trouble.
How internal audit teams affect your business
An internal audit management team impacts your organization in a variety of positive ways. Here are some of the biggest benefits:
1. Your internal audit team ensures compliant reporting
When you’re governed by compliance regulations, like the Sarbanes-Oxley (SOX) Act of 2002, you can’t afford to fail an audit. Managers are legally responsible for maintaining accurate financial statements and all internal controls must be documented. These documents are periodically reviewed for accuracy, and failing an audit can be a nightmare.
Although the SOX Act was passed many years ago, the standards for compliance have become increasingly strict in recent times. Today, auditors look at a company’s documentation with far more scrutiny than in the past, and if audit professionals find anything that looks even slightly out of place, you risk failing.
An internal audit team helps your organization stay compliant with all necessary laws and regulations that apply. You can’t fix a major problem if you don’t see it before you get audited; internal audits help by allowing you to resolve issues before official compliance audits. The result is a lower risk of getting hit with hefty regulatory fines and penalties, along with a lower chance of a damaged reputation.
2. Improved efficiency
All organizations have room to improve efficiency and effectiveness, and this can be facilitated by an internal audit team. By running audits, your team will find opportunities for process improvement, which can result in saving money through increasing productivity. The more efficient your operations are, the less time (payroll dollars) employees waste.
3. Risk mitigation
Internal audit teams identify risks and help devise ways to mitigate them. This is yet another way to protect your organization from financial loss, operational disruptions, lost productivity, and a damaged reputation.
Internal auditors are familiar with laws and industry regulations allowing them to use their knowledge to identify fund misappropriation, potential noncompliance, and other risks.
4. Reassure stakeholders
Your company’s stakeholders and investors want to know they’re investing in a compliant company. An internal audit team can help you discover if your business is operating effectively and is compliant with the regulations you’re required to follow. Offering this level of transparency to your stakeholders gives them more confidence in their involvement with your company.
5. Detect fraud and theft
Internal auditors specifically look for signs of internal theft and fraud within the data they review. It’s unfortunate, but many organizations fall victim to embezzlement, misuse of company funds, employee theft, and time fraud. Having an internal audit team is the best way to lessen this potential and find out it’s happening before it goes too far.
Internal audits are a vital asset to your company
Internal audit teams provide major value to organizations by helping them prepare for external audits and avoid the massive fines administered if policy violations are found. Business owners and managers don’t have time to conduct extensive audits for their company’s internal controls, so the best way to manage this is through an internal audit team.