The Top 5 Reasons Why an Internal Audit is Important
by Hannah Grace Holladay / December 20th, 2023
People often ask: is an internal audit necessary? What if we’re a smaller organization, should we be spending our already limited resources on an internal audit program?
If your clients depend on you to provide efficient, compliant, and secure services, then the answer is a resounding “yes”.
Internal auditing is an important function of any information security and compliance program and is a valuable tool for effectively and appropriately managing risk. Are we ensuring we are doing what we say we’re doing? Are there gaps in our policies and procedures? Are there any areas for improvement? Are we meeting our compliance goals? ? Let’s explore these important questions below.
What is the Purpose of an Internal Audit?
According to the Institute of Internal Auditors:
The Role of Internal Audits
“The role of internal audit is to provide independent assurance that an organization’s risk management, governance, and internal control processes are operating effectively.”
Internal auditing objectively enhances an organization’s business practices. It involves gaining insights into an organization’s culture, policies and procedures, and it contributes to the oversight of the board and management. This contribution is made by verifying the effectiveness of internal controls, including operational efficiency, risk mitigation measures, and compliance with relevant laws and regulations.
5 Reasons Why Internal Audits are Important
Internal auditing programs are critical for the surveillance and assurance of the proper protection of your business assets against threats. Additionally, they verify the alignment of your business processes with documented policies and procedures. Let’s examine the significance of internal auditing through five different lenses and how it contributes to your organization’s compliance with prevalent frameworks and regulations:
- Provides objective insight
- Improves efficiency of operations
- Evaluates risks and protects assets
- Assesses organizational controls
- Ensures legal compliance
Provides Objective Insight
You can’t audit your own work without having a definite conflict of interest.
To remain objective, your internal auditor or team cannot have any operational responsibility. In cases where resource constraints impact smaller companies, it’s acceptable to cross-train employees in different departments for auditing purposes. By providing an independent and unbiased view, the internal audit function adds value to your organization.
Improves Operations Efficiency
By objectively reviewing your organization’s policies and procedures, you can rest assured you are following those policies and procedures appropriately, and that they adequately mitigate your company’s unique risks.
Through ongoing monitoring and evaluation of your processes, you can identify suggestions for enhancing their efficiency and effectiveness, ultimately enabling your organization to trust its processes rather than individuals.
Evaluates Risks and Protects Assets
An internal audit program assists management and stakeholders by identifying and prioritizing risks through a systematic risk assessment. A risk assessment can help to identify any gaps in the environment and allow for a remediation plan to take place.
Your internal audit program will help you to track and document any environmental changes and ensure the mitigation of any found risks.
Assesses Controls
Internal auditing is beneficial because it improves the control environment of the organization by assessing efficiency and operating effectiveness. Internal auditing answers questions like: Are your controls fulfilling their purpose? Are they adequate in mitigating risk? Controls are only helpful if they are helping your organization meet its goals.
Ensures Compliance with Laws and Regulations
By regularly performing an internal audit, you can ensure compliance with any and all relevant laws and regulations. It can also help provide you with peace of mind that you are prepared for you next external audit. Gaining client trust and avoiding costly fines associated with non-compliance makes internal auditing an important and worthwhile activity for your organization.
Build an Unstoppable Internal Audit Program with KirkpatrickPrice
We know that building out an internal audit program is challenging. If you still have questions about developing your own internal audit program, or even strengthening your current process, our experts are ready to help!
Connect with an expert today and let’s start building your internal audit program.
More Internal Auditing Resources:
6 Steps to Construct Your Internal Audit Program
Chief Compliance Officer Series: Constructing an Internal Audit Framework
CFPB Readiness Series: Developing an Internal Audit Process
