What is Internal Audit?

Internal audits are the evaluation and monitoring of the internal processes and operations of a public or private sector organization. Issues such as corporate management, accounting, human resources, finance, environmental management, etc. can be regulated for internal audits. Audits make it easier for organizations to comply with laws, standards and other regulations. It helps to make the company activities sustainable with timely accurate reporting. It ensures that certain problems are detected before external audits organized by independent third parties and quick solutions are produced.
Companies can also perform a certain level of risk management with the results of internal audits. Situations such as waste, bribery, corruption, abuse of office, etc. that occur directly or indirectly in company activities can be prevented. The senior management of the companies can be informed about every process, operation or application that does not go well within the organization, thanks to internal audits, and can take the necessary action.

Internal audits can be organized in different periods depending on the purpose and scope. Some inspections can be done daily or weekly, while others are only done once a year. For example, an internal auditor who controls the quality of the production process has to audit the production process every day. On the other hand, the company´s certification audits are usually once a year.

What are the Types of Internal Audit?



Internal audits can be divided into different categories according to their purpose and output. We can list the most frequently regulated internal audits in today´s business world as follows:

Compliance auditing: A company may be required to comply with local laws, compliance requirements, government regulations, foreign policies, or other restrictions. To demonstrate compliance with all these rules, companies may engage an internal audit team to review the status of the compliance requirement, compile appropriate information, and provide an overall opinion.

Financial audit: Publicly traded companies are required to perform certain levels of external auditing where a completely independent third party provides an opinion on the company´s financial records. Companies may wish to be less influenced by audit findings and to conduct an internal financial audit in preparation for an external audit. Many of the questions between the internal or external auditor may be similar.

Environmental auditing: As environmental sustainability occupies more and more companies´ agendas, some companies are taking the critical steps to review the impact of business on the planet. These steps result in an internal audit covering how a company safely sources raw materials, minimizes greenhouse gases during production, uses environmentally friendly distribution methods, and reduces energy consumption. Internal audits on the environment make it easier for the institution to be more transparent to its stakeholders and to adapt to environmental regulations faster.

Technology/IT audit: IT audits can be organized for different purposes. Internal audits on this issue may be the result of lawsuits against the company, complaints filed, or goals to make IT processes more efficient. Focusing on technological processes, products and services, internal audits review systems´ controls, hardware, software, security, documentation, and backup/recovery processes. The purpose here is to evaluate the overall IT accuracy and processing capabilities.

Operational audit: These audits usually occur when key personnel leave or a new management takes over the business. The company may want to evaluate how things are done and whether resources are being used more efficiently. During the operational internal audit, auditors review whether existing personnel and processes meet the company´s mission and objectives.

What is Internal Audit?

Internal Audit Reports

An internal audit report is expected to answer some of the questions listed under the following topics:

* Criteria: What specific issue was identified and why was internal audit necessary? Is the internal audit firm preparing for a future external audit? Who requested the audit and why?
* Situation: How was the audit matter handled in relation to company objectives or expectation? Does the company have a policy that is violated, a criterion that is not met, or another condition that is not met? Is the company sure there are no problems; Or is it the view that a problem is approaching?
* Why: Why did the problem occur? Who was involved in this problem, which processes were broken? How could the problem have been avoided?
* Conclusion: What is the result of the question? Are the problems confined to the internal affairs of the company, or are there external risks? What are the financial implications of the problem?
* Corrective action: What can the company solve the problem? What specific steps will management take to resolve the issue?