A successful audit is a very subjective term and there are various parameters that can help determine the verdict. One of the measures for auditors can be how well they are able to survey the operations and identify the risks that expand in different departments. Whereas for an auditee it might be determined by appropriate reporting of the results followed by a healthy discussion on the implementation of corrective policies wherever need be. These tend to be true especially in the financial management department wherein efficient internal audit finance is essential to keep the accounting fundamentals intact while amalgamating new technologies and innovations into the operations as well.
Key components of internal audit
Before taking on the task of going ahead with the internal auditing process, one must be aware of the different steps that entail a holistic audit. It involves:
- Identification and selection of the appropriate risks that need to audit,
- Adequate planning to carry out the audit,
- Thorough execution of the plan by scrutiny of the most minute as well as the most obvious details in each department,
- Noting the progress and the shortcomings, and
- Reporting the outcomes in an understandable manner.
Here’s how one can execute the above-mentioned steps in the most optimized and fruitful manner.
Create an audit program from scratch
Planning is extremely essential when it comes to internal audit. More often than not, the audit teams lack the knowledge or the subject matter expertise to provide assurances for certain areas that haven’t been audited before. Following some random guidelines provided online will result in a project scope that amounts to testing several controls, merely highlighting the exceptions and moving on; which often fails the audit customer. Whereas a custom internal audit finance plan can help build an action-based approach that is coherent with the organization’s strategy and key objectives. This is the best way to optimize the planning stage of the process which leads to exponential leaps in the benefits of the process.
Invest in resources for the audit team
As mentioned above, a novice auditor can easily damage the credibility of the program as they may be uninformed, inflexible, or unrealistic in their process. One should allocate adequate time and resources for training the auditors. A few ways to do the same is to conduct mock audits, regular competency evaluation accompanied by shadowing other experienced team members. The team should be well-rounded and can include external consultants wherever the need be. Equip the team with material like the standard checklists that need to be covered in their initial stages, previous audit reports, workflows, and other department metrics that can help the auditor to hone in on the potential problem areas and maximize the value of each audit.
Identify the critical risk areas
Apart from the standard areas, internal audit finance should focus on areas like culture marketing, human resources, and information technology. The auditor should focus on seeking the organization’s key objectives, the strategies set to achieve them, and the processes in place to support those strategies first. A few critical risk areas other than financial management that should be included in that audit plan include data privacy and governance, cybersecurity, third party risks, and ethics and culture.
Keep a track of a few key metrics in your audits
There is a perennial pressure on internal audit to cut costs and prove its value as a contributor to the business goals. Tracking a few performance metrics can help communicate the effectiveness of the internal audit activities as well as their alignment with the organizational objectives. A few key performance indicators in an audit include:
- Time taken to complete the planning phase
- The span of risks covered in the audit scope and whether they align with the business objectives
- Check the budget to actual hours spent on fieldwork
- Timely submission of the final report
- Number and depth of the issues covered in the report
- Whether the issues are remediated by the due date
These measures are a way to take the internal audit plan to the next level in the upcoming year. Optimize each stage of the audit lifecycle through researched practices, checklists, and tools. The internal audit can bring about a positive change in the operations and provide optimal solutions for enhanced quality and compliance.