In recent years, there has been a steady increase in interest in internal audits. Today, internal audit services exist in most large and many medium-sized companies.
Interest in internal auditing consulting services is due, in our opinion, to several factors. First, it is the desire and urgent need for owners and management to streamline business processes in the company, which in many cases can lead to very tangible cost savings.
Secondly, it is the need of the board of directors or other supervisory bodies for an independent and objective source of information about the situation in the company.
Thirdly, which is especially important for emerging markets, the presence of an internal audit consulting firm in a company is relevant for company owners who transfer the reins of government into the hands of professional managers, but at the same time try to “keep their finger on the pulse.”
The internal auditor is not an executioner, who wants to see the employees’ heads rolling, but he also does not fit in as an inspector, since his main function is not to observe the operation and punish inappropriate behaviour. So, who is an internal auditor?
An internal auditor is a person designated by the company’s management to carry out verifications in the various areas of the business, by the company’s audit program, and, whenever necessary, to assist the external auditors. This professional reports only to the directors.
The internal auditor has not one, but several assessments focuses:
- Internal controls;
- Information/computing systems;
- Quality of services and products.
In addition to the focuses described, the auditor can also carry out risk checks, and compliance with laws and regulatory instruments. Periodic audit reports can help when making decisions about process changes, adjusting tight spots, reducing weaknesses, or even reassuring that things are going well.
When implementing, managers must pass on to employees the notion of cooperation, continuous improvement, and advancement of the organization.
The internal auditor can perform work that brings detective (errors), preventive/psychological (business risks), financial (with financial return), or compliance results (are people acting by the rules?).
To what extent do business owners need an internal audit? How can internal audits be useful to company managers? The decision on whether an internal audit is necessary for a company is made by the owners and the top executive management of the company.
Of course, the need for an internal audit for a company should be dictated by economic feasibility. For smaller companies, an internal audit function is probably not necessary.
However, as the size of the company grows and the management processes become more complex, the owner-managers may develop the illusion that, despite all the changes, the company’s activities are under control.
But in fact, the leader may no longer be able to control the situation in its entirety. At this point, internal audit outsourcing proves to be very useful.
Hiring an internal audit is a key attitude for the development and maintenance of a healthy and lasting company.