When talking about internal audit, the first thing people think of is a Fortune 500 public corporation having a specific department within the company that periodically perform audits for everything departments do to ensure that the underline operations comply with industry standards government regulation. An internal audit is not something only larger companies need.
What is an Internal Audit?
According to the Institute of Internal Auditors, “Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations, It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”
Large corporations are indeed more likely to have an internal audit department than small businesses are due to the more complicated regulations that must be followed. Having an in-house internal audit department to prevent things from happening is more cost-effective than paying the penalties after a regulation is violated. Although small business rarely has a specific department to perform internal audit, it does not mean they don’t need internal audit performed once in a while. Many small business owners have experienced the benefits of hiring professional CPA firms to perform an internal audit of their businesses.
When Do You Need An Internal Audit?
As a small business owner, under what conditions should you think about having an internal audit performed?
- When you need to come up with a solution to a known problem area. For example: if you notice your company has a large number of expenses every month, you need to ask yourself, how and where does the company spend its money? Are all expenditures being approved by authorized individuals and recorded accurately? Are the bills being paid on time? Are any employees operating in a dishonest way?
- When you need to verify a critical area that is functioning as it should be. For example, most companies are inevitably using spreadsheets. What are the controls on those critical spreadsheets in the company? Can anyone access them or change them? Are key formulas in the spreadsheet locked down and password protected?
- When you need to understand how and why an activity happens or operates. For example: Do you really know if your customers are as satisfied as you think they are? Would they recommend your company to others? Would it be easy for them to switch to your competitor companies? Is it your service or products keeping them satisfied? What can you do to improve their satisfaction with your company?
How does an Internal Audit Benefit My Small Business?
If any of those questions are exactly what you are thinking right now, an internal audit service would be the most suitable service a CPA firm can offer to you, and the reasons are the following:
- You define the scope of the internal audit. In other words, the audit objective is assigned by the business owner. There will be no other procedures performed other than those that are necessary for the audit objectives.
- Internal audit reports go directly to you. No outside agency or adversarial entity will know the audit findings, especially those that may have a negative impact on your business.
- It serves as an early warning system comparing to external, regulatory, or compliance audits. It allows you to identify the deficiencies and rededicate them on a timely basis.
- It provides recommendations to improve the efficiency and effectiveness of procedures.
Internal audit is deemed to be a value-added service and has been able to benefit small businesses that struggle with deficiencies and needed improvements.
Abacus CPAs LLC has a great team of internal audit experts, if you are interested and want to hear more about internal audit service, please call 417-823-7171, and we are here to serve you and your business.
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