Having sound internal controls is a vital element for every organization. A well designed and implemented internal audit can help a company to realize their objectives and also improve on their overall operational efficiency and effectiveness. Internal audit is such an important component of a business as it helps in ensuring optimal performance of a business management system. Such audits help with analyzing the system and also checking it so as to ensure that it meets performance standards and conformance. The key goal of internal audit is to help gather information about the effectiveness of the system.
Just like the name suggests, internal audit is mostly performed by a person from within the company. However, it’s ideal that the department be associated with another department that’s different from the one being audited. Working with a reputable audit firm in Singapore to oversee internal audit and carry out extensive external audit should be considered so as to ensure that the internal systems are effective.
Here are some of the things that should be given emphasis if effective internal audit is to be ensured.
Identify key areas that need improvement
The internal audit should be conducted in a way that effectively evaluates quality management system. The parties involved should be able to identify key areas that need improvement and work to ensure that the right measures are taken so as to ascertain improvement of those areas. Identifying the key areas that require improvement helps in ensuring that the internal audit process increases the functionality of the systems in place.
Taking time to identify the controls that should be tested on a periodic basis can be quite complex. However, internal controls should be undertaken with the aim of addressing three forms of control; detective, preventive and corrective controls. When determining the areas to test, focus should be on the detective controls. Detective controls identify areas where the preventive measures were not quite effective in preventing errors.
Part of the auditing process is to help with gathering input from the employees. These observations can be very insightful to the companies. As the internal audit gets conducted, employees within the company can be engaged to help with the process. The internal auditor can then get to learn the different aspects of the company and in turn become better placed to see the various parts of the company that make the entire process to flow well.
Preparation for external audit
Execution of internal audit helps with preparation for external audit. Engaging in internal audit allows a company to gain knowledge of the areas that needs improvement. Should the external auditors come up with more observations; the company can be in a position where they are well prepared to express the ideas on how the issues can be addressed.
Segregation of duties
Internal audit cannot be effectively implemented without taking into consideration the segregation of duties. Segregation of duties plays such a significant role in creating a good internal control environment. Part of the internal audit process should be focused towards reviewing the functions performed by each employee so as to identify if there are any overlaps in duties.