Understanding everything about internal auditing is a very meticulous process, but with an organization dose it will be much simpler and bring several benefits to the company.

The internal audit is carried out with the intention of ensuring that the business processes are aligned with the desired goals. It involves a series of procedures that will assist in the analysis and checking of the aspects that are crucial for maintaining the quality of work.

Next, we will present a guide with everything about internal auditing: what it is, what are the benefits of this practice, when is the right time to apply it and how should the company prepare, ensuring that internal auditing offers the greatest possible effectiveness. Check out!

What is an internal audit?

The "internal audit" is the set of procedures for assessing a company's internal controls, proving the quality of the records and their security.

It is an activity designed to observe, inquire, question, check and propose changes and procedures. It is an administrative control, whose function is to evaluate the efficiency and effectiveness of other controls.

Internal audit procedures involve: examinations, including compliance tests and substantive tests, which allow the internal auditor to obtain sufficient evidence to substantiate his conclusions and recommendations.

• Compliance tests : aim to obtain reasonable assurance that the internal controls established by management are working effectively, including being complied with by the organization's employees.
• Substantive tests : aim to obtain evidence regarding the sufficiency, accuracy and validity of the data produced by the organization's information systems.

The information that substantiates the results of the Internal Audit and control system reviews in UAE  “evidence”, which must be sufficient, reliable, relevant and useful, in order to provide a solid basis for the conclusions and recommendations.

Benefits of internal audit

Understanding the concept of internal audit and its processes, the second item in our guide to learn everything about internal audit are the benefits.

The idea of ​​internal audit is to evaluate and promote improvements in work processes . When it is done in a structured way, it provides several benefits for companies. Among them, we highlight:

More accurate identification of risks

The performance of an internal audit seeks to identify the strengths and weaknesses of the company. While strengths can - and should - be put to good use, weaknesses can indicate risks that, if implemented, influence results (to a lesser or greater degree).

Developing more effective action plans

The survey of the failures that exist in the processes allows the identification of the probable causes to be done in a much more accurate way. With this, instead of acting “putting out fires”, it becomes possible to create more effective action plans, which will act directly at the root of the problem - eliminating it or minimizing its impacts.

Improvements in the decision-making process

The monitoring of routines and the possibility of eliminating weaknesses, with permanent solutions, ensures that the manager's decision making is made with more awareness and in an efficient and effective manner.

This is possible thanks to the information that is gathered during the internal audit, creating a solid base that allows assessing the situations from different angles, identifying the pros and cons of each action and enabling a broader analysis before making a decision for a particular strategy.

Identification of improvement opportunities

In the same way that the focus is on pointing out problems and creating definitive solutions for them, the study of processes is also carried out from the perspective of which improvements can be adopted in working methods.

This allows us to see and create positive opportunities, even in those cases where activities bring positive returns. In other words, it becomes possible to achieve increasingly optimized results.

Structuring corporate governance and greater transparency

The corporate governance can be defined briefly as a set of processes and definitions involving corporate culture: the values and the relationship between top management, employees, investors, business partners and other stakeholders.

The definition of processes enables the formalization of these rules and makes management and business policy more transparent for all involved.

In what situations is the internal audit performed?

The third item in our 'Everything about internal audit' guide is learning to identify the right time to do it.

Some managers still think that internal audit is an option that only large companies use to better adapt their processes. However, it should be noted that it serves the most varied businesses, of all sizes, as long as they show symptoms that point to necessary changes.

Here are some examples of key moments to invest in an internal audit analysis:

When the company goes through financial problems

This is, perhaps, one of the most common reasons for conducting an audit in the company. Financial problems can arise as a result of:

• indebtedness and inadequate control of records (such as ineffective cash flow, poor payment management , for example)
• When the turnover is high, but in the end, there is no money left.

When there are problems with Human Resources

The turnover is the company's high? Is the absenteeism rate much higher than what is considered ideal? What are the main causes of employee dismissal? Is the hiring process time-consuming and ineffective?

The answers to these questions may indicate that there are problems in the HR area that need further attention, but that must be carefully analyzed before any action is taken.

When results are often far from target

Two factors can cause the results to differ from the planned objectives:

• inefficient processes;
• Creating goals outside of the business reality.

In both cases, it is necessary to understand where the error comes from and to identify what are the possible causes and solutions.

When the objective is to expand the business in a structured way

Many entrepreneurs aim to grow the company over a period of time. However, when this growth is not planned, there are likely to be future difficulties, such as lack of an adequate structure, problems with the expansion of the team and imprecise definition of new processes.

How to make an internal audit plan

And the fourth and final item in our guide with everything about internal auditing is how a company can prepare for the audit process.

Although internal auditing helps to achieve greater organization in the company, it also needs to be well designed and requires preparation for it to happen. Here are some key points:

1. Make a plan

Planning is the foundation of any successful activity. Even more so when it comes to an internal audit, a process that requires special care with details. Therefore, it is necessary to structure how it will occur. This involves:

• point out the aspects that need more attention;
• raise the necessary resources;
• Develop a schedule according to each need, among other things.

To ensure greater effectiveness, it is worth involving representatives from each area. Thus, it is possible to know when the resources will be available and what are the critical points and reserve the dates for the audit.

2. Allow time for the audit

As stated above, it is necessary to set dates for the audit to be carried out. This is necessary to maintain the organization, in addition to increasing the dedication in the analyzes, contemplating every detail and making the reports accurate.

Read also: Are you looking for Auditors in UAE

For this, it is necessary to be aware that the processes can be stopped and that people will possibly have their productivity compromised when assisting the auditor in understanding each method performed.

3. Develop checklists

As is already known, the internal audit contemplates several aspects and many of them are very detailed. In order not to run the risk of forgetting an important point, the ideal is to prepare a checklist for the area or process - depending on the level of details that will be observed.

Thus, we are sure that all analyzes and checks have been carried out as planned. This can also help later on in preparing the report.

4. Don't neglect pending issues

Internal audit is an ongoing process. If it is carried out for the first time, some non-conformities will be raised and the processes will need to be reassessed in the future, with an analysis of the effectiveness of the adopted solutions.

However, if it has already been done other times, the previous pending issues need to be detailed so that it is possible to identify whether they still exist or have been corrected.

As you can see, knowing everything about internal auditing goes far beyond the manager's option to improve his activities. The process needs to be seen as a need to better structure the company - from the operational to the most strategic levels.

Did you like this content? To further improve your knowledge, be sure to check out 10 tips to prepare your company to audit internal processes!

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