The Role Internal Auditors Play in The Management of a Company

The Role Internal Auditors Play in The Management of a Company

A company can assess its overall performance and know where to make improvements with the help of an internal audit. The auditor’s primary objective is to identify any significant risk factors that will help address current weaknesses and help the company anticipate potential future concerns. Overall, the audit will check various processes and controls to find what’s working and what’s not so that improvements can be implemented where necessary.

Read more about internal audits on Barclay Simpson.

What Is an Internal Audit?

From a professional point of view, an internal audit is designed to assess a company’s operations and offer assurance on risk management, internal governances and control processes. The auditors are part of the company’s staff but work independently from the business and operations they evaluate. They report to the highest level in the company, which could be the audit committee, the Executive management, or the Board of Directors.

Given this, the internal auditors work with the management to evaluate the company’s operations and assess who risks are being managed and if this is being done using the right processes. As such, the audit also helps to identify if all the necessary procedures are being followed. The reports they hand over will state the strengths and weaknesses of the business operations and give recommendations on where improvements are required.

What Are the Benefits of Internal Audit?

The audit process helps the management to identify and correct weakness thus improving the internal control of operations. The review focuses on issues that are valuable to the company and vital to the continued existence and prosperity of the business. The entire entails a lot of consultations along with declarations. Consultations will focus on reviewing the processes and systems and giving suggestions on how and where improvements are necessary. The declarations are more about the sharing of information between the management and auditors on how the operations systems and processes that are in place are working.

The internal audits, therefore, help the management and top brass of the company to know that they are fulfilling their mandate in the company. The checks also help them to show all stakeholders that they are at the helm of things ensuring everything is running smoothly and are effectively managing the company by evaluating all risks and pointing out where improvements are needed.

What Is the Difference Between Internal Auditors and External Auditors?

With the internal auditors, they are expected or required to report to a designated senior level of a company’s management which can include the Board of Directors. However, the external auditors report to the stakeholder that govern a business operations from the outside and not from within the company. The internal auditors evaluate the operations systems and recommend ways of enhancing or improving their effectiveness.

The internal audits are done by company employees that are mandated to evaluate all processes and report to the management. But if the business lacks the money to employ a team of auditors or just one on a full-time basis can opt to outsource such services. The outsourced internal auditors can review the business practices, assess the risks, a give recommendation; this is different from the work of the external auditors who focus on examining the financial records of a company and issues their opinions regarding a company financial statements. The external auditors are often employees of a private audit firm whose appointment is done via a shareholder vote; therefore, these auditors will report to the shareholders that employed them.

Internal audits are meant to help with the evaluation of a company’s governances of operations, the internal control processes and the management of risks to give recommendations regarding how the company can better the effectiveness of its operations. The will pass their findings and recommendations to the highest levels of the company, that can be the senior management or the Board of Directors. Overall, the internal auditors help the top management to meet their responsibilities and show the stakeholders that the running and success of the business is under competent management.

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