An internal audit, though it should be subjected to the same quality of rigorous examination, is not an external audit. Internal audits are more often conducted as value for money exercises, as opposed to an assessment of the true and fair’ presentation of the business’ financial statements. An internal audit is self to having a check up by your general physician… it seeks to point out what is going right, what needs adjusting, and what is going wrong! In order for it to be completed properly both parties [management and the internal auditor] must be honest.

An internal audit is thus essentially a management tool which seeks to ensure that the decision making process is sound and veritable. In essence the internal audit can vary from all encompassing to a very narrow and specific aspect of the enterprise’s operations and systems. An internal audit may for instance focus on the systems of operational controls; cash management; or even the safeguarding of company assets.

In order for an internal audit to be done satisfactorily, the person conducting that audit should possess the necessary training and accounting qualifications that best express their ability and capacity to perform the task. Secondly that person’s character should be perceived to one of independence and integrity. Furthermore he/she should be granted the authority to examine and interview any documents or personnel which they believe can provide the information necessary to complete the audit. Lastly he/she must be given specific reporting guidelines, a time frame and access to all files so as to avoid conflict within departments or amongst superiors.

A very useful tip for completing the audit is for as management, to respond to the audit enquiries and inquiries in a timely and sincere manner. Secondly try to keep records of the business’ transactions and your decisions in a physical or electronic state. Too many small business operations function with the heads of the owners or managers.

Management should be willing to take criticism and be objective in their analysis of the solutions proposed. Coercion and hiding information is retrograde step which will significantly hamper the quality of the internal auditor’s efforts. You should remember that more often than not the internal auditor reports only to you… so it is to your benefit to be as forthcoming and supportive as possible.

Internal audits are most effective in a business which promotes a culture of quality and professionalism; a business where the staff at whatever level has no objections to having their work examined and evaluated.