Learn about internal audit, its functions, and how it’s conducted in assessing organizational operations.
Published 21 Jul 2023
An internal audit is a systematic and independent examination process conducted within an organization to evaluate and improve its internal controls, risk management practices, and governance processes. It’s an integral part of an organization's internal control mechanism and is typically carried out by a dedicated internal audit function or department.
The primary objective of an internal audit as part of an organization’s audit program is to provide assurance to management and the board of directors regarding the effectiveness and efficiency of the organization’s operations. Also, this helps ensure that internal controls are in place to mitigate risks, prevent fraud, and safeguard the organization’s assets.
Further, it contributes to enhancing operational efficiency and effectiveness. Internal audits identify areas where processes can be streamlined, costs can be reduced, and operational performance can be enhanced.
In a nutshell, here are the key functions of an internal audit:
Performing an internal audit involves a systematic and structured approach to evaluate and assess the effectiveness of an organization’s internal controls, risk management processes, and compliance with applicable laws and regulations.
Internal Audit Process
Generally, here’s what an internal audit process looks like:
Eliminate manual tasks and streamline your operations.
A complete and in-depth internal audit report typically ends with a summary of the findings, following these 5 Cs:
Here are some practical internal audit examples on how it is conducted and reported in various industries:
Food and Beverage Controls
Cash Handling and Point of Sale (POS) Systems
When conducting internal audits, it’s crucial to be aware of common mistakes that auditors may make. Being mindful of these can help auditors improve the effectiveness and efficiency of their audit processes.
With that, here are some common mistakes to avoid:
To guide organizations from various industries on how to conduct an internal audit, standards and regulations can be followed and complied with. These help ensure consistency in performing internal audits that follow a systematic approach.
The Institute of Internal Auditors (IIA) has established a set of standards known as the International Standards for the Professional Practice of Internal Auditing (Standards). These standards provide guidance and best practices for conducting internal audits. The current edition is the International Professional Practices Framework (IPPF), which includes the following core standards, among others:
Internal auditors need to familiarize themselves with these standards and apply them in their audit practices. Adhering to these standards helps ensure the credibility, effectiveness, and professionalism of internal audit activities and contributes to the value provided by the internal audit function within an organization.
To help organizations stay ahead of the curve, boost productivity, and achieve greater accuracy in their auditing practices, they must consider streamlining their internal auditing processes with the help of technology.
Using an internal audit software like SafetyCulture (formerly iAuditor) is important for them, as it not only ensures safety and compliance but also drives operational improvement. With SafetyCulture, businesses can foster a culture of excellence, mitigate risks, and optimize their operations for long-term success using the following features:
Patricia Guevara is a content writer and researcher for SafetyCulture. With her extensive content writing and copywriting experience, she creates high-quality content across a variety of relevant topics. She aims to promote workplace safety, operational excellence, and continuous improvement in her articles. She is passionate about communicating how technology can be used to streamline work processes, empowering companies to realize their business goals.
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