Internal Audit Process

The main objective of an internal audit assignment is to evaluate and, if necessary, improve through recommendations, the effectiveness of internal business controls, risk management plans and overall business processes. A typical audit procedure begins by evaluating current processes and procedures. Auditors then analyze and compare the results with internal control objectives to determine whether the audit results comply with internal policies and procedures; Finally, auditors compile an audit report to present to the board of directors or to the audit committee, the CEO, and other stakeholders related to the audit assignment. The audit process consists of 13 steps which we can summarize.

1. Initiate the audit: To begin, the auditor must initiate the audit by contacting the owner of the process to be audited and ensure that the audit is feasible. It’s important to make sure someone is available to present evidence when you want to audit, rather than trying to make a surprise appearance.

2. Review the documents: Then the process requires you to review the documents This will help you know how big the audit will be; This knowledge is important for the next step. The chief auditor will supervise the activities of the audit team, and an audit notification memo is sent to the department/department to be audited at least three working days before the audit.

3. Develop the audit plan: The purpose of the document review is to develop your audit plan for what will be audited, who will be auditing, when it will occur, and who will be audited. Here, you decide how the audit will be divided if multiple auditors are used and how much time will be devoted to each process in the audit.

4. Allocate work to auditors as planned: Larger audits may allocate work among several auditors, each undertaking multiple processes to perform the audit. This way, you can shorten the time it takes to disrupt an audit process, such as having three auditors work for one day instead of one auditor working for three days.

5. Prepare working papers: The engagement auditor then prepares audit working papers which will identify what the auditor wants to verify, what questions to ask and what they expect as evidence.

6. Determine the audit sequence: The next step is to determine the audit sequence from the opening meeting by presenting the audit findings. When done correctly, the process audit sequence can help streamline the audit flow.

7. Conduct opening meeting: The audit starts with an opening meeting. This is to inform auditors that this is not a surprise audit, and is being done to verify adjustments rather than find errors. Some fine-tuning of audit timings can be done at the opening meeting, as well as ensuring that everyone understands the scope and scope of this particular audit.

8. Review and Communicate Documents: After the meeting, any documents presented by the auditor should be reviewed to gather relevant information that was not previously available.

9. Conduct the audit: This step is often considered the actual audit. The auditor asks questions, and collects records and observations that will demonstrate that processes meet requirements. Again, it’s important to remember that an auditor is there to try to verify that a process conforms to set requirements, not to dig around until errors are found.

10. Develop audit findings: After the auditor completes verification, they must develop audit findings and prepare any audit conclusions to be presented. If all are found to be consistent, no corrective action will be presented; If not, corrective action needs to be properly prepared. Highlighting the best practices in a process is equally important, as it is identifying any errors. Some companies use a process of internal auditing to identify opportunities for improvement, which the process owner can review and adopt if desired.

11. Current Findings and Conclusions: Findings and conclusions are usually presented in a closing meeting, so that process owners can understand and ask questions as well as clarify any misunderstandings in the audit.

12. Formal distribution of audit report: The final findings are formally written and distributed in an audit report. This gives everyone an easy reference to the actions required, as well as a record of the audit results.

13. Follow-up on Actions/Corrective Actions: Perhaps the most important part of an audit is for the auditor to follow-up on any actions taken, as a means of remedial action and the completion of the audit. Without rectification and corrective action being followed, the same problems may be found continuously during subsequent audits, defeating the purpose of the audit.

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