Corporate Investigation What are the Benefits of an Internal Audit?
There are numerous benefits to conducting an internal audit. However, they can depend on the nature of the internal audit and the type of company that runs it. Generally, though, the benefits of an internal audit are:
- Increased efficiency
- Decreased risk exposure, generally from discovering flaws or shortcomings in compliance mechanisms or information technology cybersecurity
- Discovering internal misconduct
- Verifying financial statements and other important information for legally-required disclosure
Together, these benefits can streamline a business’ practices, improve its bottom line, shield it from threats, and increase its future prospects. Many businesses that run an internal audit come to see the process as an investment in the company – one that pays substantial dividends in the long run.
The internal auditing professionals at Corporate Investigation Consulting help company executives and stakeholders conduct effective internal audits that produce these benefits.
1. Internal Audits Find Inefficiencies and Propose Solutions
Internal audits often focus on reviewing the company’s business practices, policies, and internal controls. By reexamining them and monitoring how they function, auditors are often able to find inefficiencies and other weaknesses in the system. These can take a huge number of forms, from problems like:
- Nearly identical job functions being performed by multiple people
- A needlessly excessive physical distance that has to be traveled by employees from one work station to another
- Confusing workplace hierarchies
- Unnecessary levels of oversight or sign-off requirements by supervisors
On a day-to-day basis, these issues and others like them may be little more than an inconvenience for workers. In some cases, they are barely noticeable. Over time, though, they can amount to a significant amount of time and money lost to the inefficiency.
Internal audits look for workplace problems like these and then propose solutions that, if implemented, would eliminate or at least alleviate the inefficiency. In some cases, the payoff for the change would make itself financially worthwhile in only a few months.
In many instances, the findings by an internal auditor come as a surprise to company executives. Their familiarity with their own company often keeps them from noticing how things can change. The fresh perspective that auditors bring to the table – as well as experience with other, similar companies – help them see issues that may have been overlooked and then propose original solutions that solve them.
2. Identify Compliance Shortcomings and Reduce Risk Exposure
Many internal audits focus on a company’s compliance mechanisms, especially in the fields of healthcare and securities trading where the legal obligations imposed by federal and state statutes and regulations are intimidating and onerous. Rather than looking to improve the company’s performance, the purpose of these internal audits is to make sure that the business is complying with the law and is not exposed to the legal liability that can come with noncompliance.
Internal audits like these typically target specific aspects of the company’s compliance obligations, like:
- Billing practices of hospitals and pharmacies
- Contract compliance for law firms
- Foreign Corrupt Practices Act (FCPA) compliance of international corporations
These are all entities that have numerous laws that they need to abide by. Many of those laws impose active requirements that the company has to affirmatively take in order to stay on the right side of the law. Failing to take those steps can expose the company to intrusive investigations, embarrassing allegations, and legal liability in the form of administrative sanctions, civil fines, and potentially even criminal penalties. The steps that have to be taken to avoid these penalties, though, are often vague.
A good internal audit can review the steps that the company has deemed necessary to satisfy their legal obligations and see if they are as effective as they were supposed to be.
3. Detect Internal Misconduct
Another important benefit to running an internal audit is that it can uncover signs of employee misconduct that would have continued to go unnoticed without the inspection. In most cases, that misconduct is merely negligent, like when a worker is failing to uphold their role in the company’s compliance protocols and putting the business at risk of liability. Occasionally, though, that misconduct is deliberate, fraudulent, and potentially even criminal.
These issues can be spotted in audits that focus on compliance mechanisms as well as those that pinpoint the business’ routine practices and policies. The most common first sign of trouble is simply money going missing at a particular point in the process. Generally, the problem is confined to a worker having an opportunity to divert the company’s funds into his or her own pocket and then making the most of it. In some rare circumstances, though, the problem is more widespread, with multiple or numerous employees having a hand in the conspiracy.
Resolving these problems can be tricky, but they can also answer some pressing questions that company executives may have had simmering for a while.
4. Verify Information and Accuracy of Disclosures
Internal audits also help companies by verifying internal information that the company has about its business practices and finances – a benefit that is especially important for companies that are about to issue critical disclosures about how the company is faring.
This aspect of an internal audit into the company’s finances can be an important one to consider when deciding when to start the auditing process. In many cases, the information to be disclosed would have had to be verified, anyway. By making it a part of the internal audit, the company can streamline the ordeal by avoiding a duplicative verification process.
Internal Auditing Professionals at Corporate Investigation Consulting
These are just some of the most important benefits that come with an effective internal audit of your company. Others include the peace of mind that comes with knowing that your company’s compliance protocols have been tested and strengthened, the input that a professional auditing consultant can provide to your company, and the deterrent effect that the audit can have on employee negligence or those who have been eyeing company property for their own taking.
The auditing consultants and experts at Corporate Investigation Consulting can help your company conduct an internal audit that provides all of these benefits. Contact us online or call us at (866) 352-9324.