Regular, comprehensive audits keep organizations on track. Audits come in all shapes and sizes, too: internal and external audits; audits of finance, audits of data, audits of operations.
As a business owner, whether for a large enterprise or a small business, you want to assure that your stakeholders can trust your business operations and that your finances are in order. Internal audits are a great way to reinforce that trust and credibility. They also reduce the costs of external audits, on your door, and lessen your exposure to fraudulent practices and reputational risks.
Before we dive into the benefits of specific audit activities, let’s understand the different types of audits.
Types of Auditing
As mentioned above, different types of audits can happen within your organization every year. Understanding how each type benefits your business operations is helpful to appreciate an audit’s purpose and contribution to your company’s success.
Internal audits are audits undertaken by the company itself, either by an in-house internal audit team or a specially hired audit firm that answers to your management team alone. Internal audits are presented to management or the board for review and further action.
An independent external auditor performs audit activities to check compliance and financial reporting accuracy for statutory or public reporting purposes. For example, healthcare providers undergo audits from the U.S. Department of Health and Human Services; and all publicly traded companies undergo annual external audits, the findings of which are published for review by investors.
IT or information systems audit
These audits, performed by either internal or external audit teams, assess the readiness and resilience of an organization’s IT system infrastructure and controls that are in place to manage critical information and data assets.
Why are so many different types of audits required? The following section should help you understand the need for additional audit types, especially internal audits.
Purpose of Auditing
Audits, especially internal audits, are a tool to help management understand the organization’s performance, so that the company can improve its business processes and controls. Audits work by collecting evidence and data points about specific business functions, to compare that information against expected performance standards.
The Institute of Internal Auditors (IIA) defines the internal audit process this way:
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
Audit functions act as watchdogs over your organization’s integrity and accountability. By scrutinizing your financial reporting, security, and business operations, and then providing objective assurance about progress toward your business goals, audits help management and other stakeholders understand how well the business is performing.
Who Benefits from Auditing?
Audits benefit both internal and external stakeholders. For example, in the case of financial audits, investors benefit from more assurance that a company’s financial audits can be relied upon; management and the board benefit from knowing where their vulnerabilities to fraud or financial misstatement might be, so they can address those problems before an incident leads unhappy shareholders to sue them.
Or, if an organization works in specific sectors such as payments processing or healthcare, that business is subject to certain industry compliance obligations such as PCI DSS or HIPAA standards for data security – standards that include regular audits of data security programs. When businesses pass those audits, that gives them more protection from regulatory fines and sanctions if the company suffers a data breach; and consumers get more assurance that they can trust that business with their personal data.
Since internal audits are a standard requirement, let’s understand the detailed benefits of internal audits in the next section.
6 Benefits of Internal Auditing
Strong internal controls
Internal audits evaluate your internal controls, which comprise actions, systems, and processes (including monitoring) to assure that those controls are well designed and implemented and that they work as intended, no matter who serves in which role.
Internal audits spot redundancies in your business practices, procedure, and governance processes; and develop recommendations for streamlining, saving time and money.
Internal audits scrutinize your cybersecurity environment – for example, identifying all your digital devices, and examining whether those assets are secured per your policies. These audits also look for vulnerabilities in your digital systems and networks and advice on closing gaps.
Internal audits provide assurance of process integrity – that is, that systems work the way they were intended to work, and the way that management promises those systems work. These audits can identify risks of human error or other system failures, such as complicated software that might crash at critical moments.
Internal audits consider all the identified risks to your enterprise and analyze whether your risk mitigation measures are working as they should. Where those measures aren’t, audit reports will tell you what you can do to resolve the issue.
Internal audits check the laws, regulations, and industry standards with which your organization needs to comply, and then assess whether you are, in fact, compliant. Where you miss the mark, auditors recommend how to remediate the problem.
How Automation Improves Internal Auditing
Regulations change; businesses do too, as they expand or contract or acquire new operations. Cybercriminals devise new methods of breaching systems, networks, and devices. As a result, fraudulent practices can slip under the radar.
Internal audits will catch these and other issues, but the time between audits is when these issues arise. Continuous monitoring is imperative, but your auditor can’t be everywhere. To help, you need automation.
Take Control of Internal Audits with RiskOptics
The ZenGRC offers unlimited internal audits with just a few mouse clicks. It displays results on user-friendly, color-coded dashboards so you can see where gaps are and how to fix them. Its workflow features allow you to assign, track, and manage your governance, risk management, and compliance tasks.
ZenGRC also continuously monitors your controls from systems in between audit runs, so your networks and applications are effective and up-to-date between audits. The ZenGRC’s “single source of truth” repository collects and organizes your audit trail. As a result, you are ready when it’s time for those dreaded external audits necessary to demonstrate compliance and attain the required certifications.
With internal audits taking care of themselves, you can focus on other matters like boosting your business and bottom line. To understand how to conduct worry-free internal audits, book a demo with RiskOptics today.