Sounds scary. However, auditing doesn’t have to be such a frightening world. It isn’t just people who have done something wrong who hire auditors to come in and go through their books. Auditing is beneficial for all sorts of different types of businesses and companies who want to improve their efficiency.
“An internal audit is designed to review what a company is doing in order to identify potential threats to the organization’s health and profitability, and to make suggestions for mitigating the risk associated with those threats in order to minimize costs (Investopedia).”
Running a business can be a complicated proposition. The more successful you become and the more you expand, the greater the potential for wasteful practices to emerge. Poor communication or failing to streamline your operation will cause you to employ more complicated methods to run the business than you would otherwise need to.
Internal auditing is by far the best way to quickly and easily identify these problem areas and allow you to make necessary changes.
Optimize Daily Performance
Performance is the key to successful business practices. It takes sustained and concerted effort to keep a business running at its optimum level at all times. Auditors can not only help identify areas where performance can be improved, but they are also usually trained to recommend precisely what changes
could be made.
A business will gain the most from the internal auditing process if they allow for small, regular checks rather than allowing things to stagnate over a long period of time. The less convoluted, outdated and difficult data an auditor has to wade through, the more time they can devote to each individual factor, going through each with a fine toothed comb.
Curb Employee Fraud
Apart from improving performance, internal auditing can have other benefits as well. For the owner-operator of a business, it can be difficult to be aware at all times how the various employees in your business are performing.
Auditing can identify areas in which staff are capable of improving, but it can also reveal if any shady practices are potentially taking place. Company fraud is a rare but possible danger of running a business which hires many people. Ensuring that your employees are all worthy of trust is essential to ensuring your business runs as optimally as possible.
4 Types of Internal Audits
There are different types of auditing. If you are already aware of an area in which you business is lacking, you might opt to employ a type of audit in particular.
A financial audit will look at whether the financial statements of a business are in accordance with the standards expected of them. This standard is quite variable, but if there is a benchmark you desire, then statements can be compared to these expectations.
An operational audit is a systematic approach to examining all aspects of a business’s procedures. Operational auditing focuses less on financial data and instead on the actual operational practices of a business. This data is then presented to the senior management along with ideas on improvements that may be made.
A compliance audit is less focused on how a business can improve its financial or operational practices. Instead, it ensures that a business is operating in accordance with internal or external expectations. This form of audit can help a business ensure that all its practices are above board with any regulatory bodies so as to avoid any issues in the future.
Information Systems Audit
An internal audit of information systems will take a look at the infrastructure a business uses. Outmoded or ineffective equipment can be extremely disruptive to performance. Likewise, a work environment that is not up to standard can have an adverse effect on moral and therefore efficiency.
If you feel that your business could benefit from an examination of all its aspects, then an integrated audit will cover financial, operations, compliance and information systems controls.
Running and scaling a business isn’t an easy task. There are always difficulties to deal with that could negatively affect productivity. An audit is an excellent way to ensure that your business is running at peak performance without having to expend any personal effort.
As the face of the business world changes, auditors are taking on a more important role within it. Though there is still some stigma attached to the name, an auditor can be a business owner’s best friend for improving their bottom line.
This article has been edited and condensed.
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