Internal audit plays a core role in keeping organizations on the right path, with internal audit management key to delivering the “checks and balances” that assure companies’ governance, risk management and compliance processes. Internal audit ensures that internal controls are operating as they should and, as a result, helps your organization remain ahead of developing risks.
What Is Meant by Internal Audit?
Internal audit is how companies evaluate their internal controls, including governance and accounting processes. It has increased significantly in recent years as the Sarbanes-Oxley Act has tightened reporting requirements around financial controls.
Internal audits ensure that your processes comply with relevant regulatory and legislative requirements, and support accurate data gathering and reporting, whether on financial, ESG or other data.
As a result, they can also help your senior leaders and management. Internal audit is the first opportunity to identify problems before going to an external audit and enhance operational efficiency by spotting potential improvements.
What Is the Purpose of Internal Audit?
By providing the first line of defense against poor processes and controls, an internal audit is your primary tactic in the war against non-compliance. But the benefits of a robust internal audit management process go beyond tick-box compliance.
Good internal audit management can also monitor and improve corporate culture, something recognized as vital to a compliant organization. As the Financial Reporting Council, a UK regulator, recently noted, the internal audit process “has a vital role to play in providing assurance and reports to the board that the culture is healthy.” Governance and culture are intrinsically linked, with the FRC believing that good governance is “aligned to a positive corporate culture.”
And there are further benefits. By aligning internal audits with your broader business strategy, you turn a compliance exercise into an opportunity to use the audit process for business improvement.Internal audits can play a central role in achieving your ESG strategy. It bolsters an integrated risk management strategy by providing safeguards against threats like fraud and cyberattacks. And by harnessing some simple best practices, the internal audit team can elevate themselves from compliance practitioners to business leaders.
While an external audit may only look at some specific, prescribed controls and risks, an internal audit can be more expansive. In an ideal world, your internal auditor is a combination of auditor and consultant, checking on your processes and suggesting improvements that help your organization evolve and grow.
Exploring Best Practice Internal Audit Management Processes
Being able to achieve this demands that you put in place some best practice approaches to internal audit management. We’ve rounded up seven best practice internal audit management strategies to help you.
1) Failing To Plan Is Planning To Fail
Preparing effectively for an internal audit is vital — it will help get buy-in for the process, ensure deadlines are met, and facilitate the availability of all the data you need to conduct the audit.
Explain the audit process to the team you’re auditing. Don’t forget to convey the benefits of the audit; it’s a process designed to benefit them, not just to fulfill a governance need. Talk about increased efficiency, better processes, and the opportunity to do a trial run for an external audit.
Establish a core team, communicate the scope of the audit, and share details of the data you will need and the systems you will want to access. Carrying out a preliminary risk assessment may help you with this last point.
These will help reassure those you’re auditing and ensure that you have everything you need to complete the audit.
2) Engage With the Business You’re Auditing
We touched on this in point one, but it can’t be overstated. Turning up once a year, with little forewarning, auditing a department and then disappearing for another 12 months does not help build the necessary bridges between internal audit and the rest of the business.
Communicate frequently, explain your objectives to resonate with the team being audited, and feed back on findings, next steps, and outcomes to ensure everyone involved feels part of the internal audit process.
3) Identify Key Controls
Your risk assessment will enable you to pinpoint significant risks and the controls that manage them. Whether this means testing your organization’s zero trust architecture or other IT risk management strategy, measuring your sustainability practices, examining financial controls — or something else specific to your organization, identifying key risks and their controls is the next essential step in the internal audit management process.
4) Test Out Those Controls
This can be termed the “fieldwork” phase. It’s when you are out in the business, gathering the information you need on controls, measurement and remedial actions. Capture your findings in writing to build a compliant audit trail. And keep communicating with your internal audit “clients” so everyone is appraised of your objectives and actions.
5) Be Proactive in Reporting
The audit report is the output of the internal audit process. Best practice internal audit management makes the collation of this report an integral part of your fieldwork. Don’t wait until you’re finished with your data-gathering to start writing up the report; you may forget or miss the crucial details or nuances that inform a rounded audit report.
It’s also an idea to share some of your findings as you write them up; this gives audited teams and other internal stakeholders an insight into what’s coming in the final report and can prevent unpleasant surprises.
6) Take a More Agile Approach
Internal audit management has traditionally been a rigid process with set deadlines and parameters. But introducing an element of agility has been shown to get all stakeholders on board in a way that a once-a-year audit cannot.
Position the internal audit management team as business partners who act in a consulting capacity to help business teams continuously improve their risk management processes. This will help you to gain the respect and support of the team you’re auditing and convey that you are all working towards the same end.
7) Harness the Benefits of Internal Audit Management Software
Internal audit management can be streamlined and upgraded by making use of internal audit management software. If you want to turn the audit process into an intrinsic part of your corporate strategy, implementing a software-based approach can have huge benefits.
Automated workflows speed the internal audit process — and at the same time, minimize the potential for human error or omission. The outputs are “board-ready,” moving beyond data to insights that inform C-suite decision-making.
And internal audit management software is improving all the time. While the first generation of automation advanced internal audit hugely, it had its limitations which, at times, introduced new challenges, like the emergence of “dark data” that could not be analyzed or shared. Today’s intuitive audit management software overrides these issues, enabling internal audit teams to access and interrogate 100% of their data.
Explore the Benefits of Internal Audit Management Software
These seven steps will help accelerate your internal audit management process from compliance to strategic advantage. Perhaps the one that can deliver the most, and fastest, results is the adoption of internal audit management software.
Modernizing your approach to internal audit smooths the process and enhances outputs, propelling your internal audit team to trusted advisor status by enabling you to deliver actionable audit insights. Find out more about how Diligent’s internal audit management software can help you efficiently and effortlessly manage the internal audit process.