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What Internal Audits Do And Why They Are Necessary

The dynamic pace of today’s business landscape also means that failure to effectively evaluate and manage risks has the potential to ruin any organisation.

Regardless of the industry, companies face increasing competition with each passing day. Whether you’re a massive enterprise, or a small startup, monitoring and maintaining operational efficiency has never been more important. Consequently, internal audits have grown to become an essential component of a business’ success.

The dynamic pace of today’s business landscape also means that failure to effectively evaluate and manage risks has the potential to ruin any organisation.

If your clients or end users expect products or services that are secure and compliant, you will need to ensure that you’re making the most of internal audits.

Simply put, an internal audit is an independent activity designed to objectively evaluate the effectiveness of an organisation’s internal controls, risk management and governance. It is typically pre-emptive in nature and aims to uncover any discrepancies between operational processes and their intended purpose.

Upon completion of the internal audit, a detailed report is provided to management, outlining the findings alongside any recommendations. By including activities that affect businesses from top to bottom, internal audits go beyond your organisation’s internal processes: they’re concerned about the overall wellbeing and success of your organisation.

So internal audits are there to examine the operation of your management system and provide top level management with the information needed to ascertain whether the system is operating effectively or if any changes need to be made.

An Internal Audit can be performed within the organisation by auditors who are employed by the organisation, but who should have no vested interest in the audit results of the area being audited. Alternatively you can use an External Auditor who will also be free of any conflict of interest.

Whichever one you choose, you should make sure that the auditor is actually competent to do the job - this can be based on skills, formal training and experience.

For organisations with a formal management system in place, such as ISO 9001, ISO 14001, or ISO 45001, this is a requirement of the standard, which means it must be done. However, conducting internal audits is a vital process regardless of whether you have to do it or not. It’s there to serve several purposes:

  • Ensuring adherence to the company’s processes – the auditor should look to ensure that the organisation is complying with its own procedures.

  • Ensuring the effectiveness of the system – the auditor should look at all processes, reviewing the value of each process, and ensure that the procedures still meet the organisation’s objectives.

  • Providing information for management reviews – the results of audits should be documented so that they can be reviewed and analysed, providing information for use in corrective action programmes and management reviews.

  • Identifying opportunities for improvement – the auditor should examine documented evidence against the management system that is relevant to the function or department being audited. This could include staff competency, qualifications or training. Problems should be discussed with the auditee and corrective/preventative actions should be recorded.

  • Driving continual improvement – the auditor needs to follow up and verify that any corrective actions have been completed by the agreed date.

You should conduct internal audits at planned intervals throughout the year. This will enable you to regularly determine whether the system is being effectively implemented and maintained.

Another shameless plug here - The Ideas Distillery offers a comprehensive, objective auditing service which can be undertaken to verify compliance against International Standards (ISO), legal requirements or internal procedures. This service will ensure impartiality of the audit process.

Article originated in The Ideas Distillery blog

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