One of the most effective tools for identifying opportunities to improve business performance and, therefore, one of the company’s competitive advantages can be an internal audit. What is an internal audit, and how can it be useful for a company? The purpose of this article is to answer these questions.
Internal audit – a guarantee of improving the enterprise` activities
Today, the concept of “internal audit” has become widespread in business. Many large enterprises and companies prefer to create internal audit services and departments, training their employees. In addition, the labor market is constantly growing in demand for specialists with relevant knowledge and an international diploma.
Internal audit in an enterprise is an activity that aims to provide objective and independent advice and guarantees to improve the activities of an enterprise. An internal audit aims to assess risks, find ways to reduce them, and increase the profitability of business processes. Auditor advice includes evaluation, analysis, and reporting on the efficiency and reliability of processes. They are addressed directly to the administration of the organization.
The main tasks of internal audit at the enterprise:
- checking the internal control systems to determine the level of efficiency of the departments;
- development of an integrated risk management system, analysis of its work, as well as the creation of measures to reduce them;
- control over compliance with the principles of corporate governance.
Reasons to hire internal auditors
What is the reason for such a demand for internal audit specialists? The active growth of business and, accordingly, competition, the emergence and development of new financial areas, and a series of high-profile scandals and bankruptcies have proved the need not only for careful control of financial activities but also for the availability of a service that could predict risks, as well as make the enterprise more efficient.
In Europe and the United States, there is a tendency to separate the functions of ownership and business management. The owners develop a general strategy for the development of the enterprise and coordinate the main directions, and hire top professional managers to solve everyday problems. However, with such a business organization, monitoring the company’s state of affairs becomes relevant. And here, the most effective tool will be an internal audit. In addition, the conclusions of the internal audit provide the owners with a complete and, most importantly, objective assessment of the enterprise’s activities.
Nowadays, large companies are actively organizing an internal control system. Therefore the demand for specialists who could take on these functions is growing, but the requirements for such specialists are quite high.
The role of the outsourcing
The modern functions of internal audit are related to a wide range of issues that quite diverse specialists can solve. These are not only internal auditors but also specialists in financial forecasting, risk management, and even cybersecurity. Only when fully staffed can the internal audit function be truly effective. Unfortunately, such people’s recruitment, maintenance, and motivation have become quite difficult and costly for many companies. That is why the latter transfer some of the functions and tasks of internal audit to outsourcing.
Outsourcing allows companies to access knowledge and experience, innovative methods, and technologies for auditing. As a result, the effectiveness of the internal audit function is greatly improved, which positively affects the work of the entire company. Another significant benefit is increased independence of internal audit. In any case, full-time specialists cannot be completely independent of management. Transferring this function to outsourcing will lead to objectivity and a focus on results, not the satisfaction of certain whims of management.