What is an internal audit?
The Institute of Internal Auditors defines an internal audit as "... 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."
Put another way, an internal audit reviews and evaluates current processes, looks for areas of risk, and makes sure financial and operational information is accurate and reliable. An internal audit helps make sure your assets are safe and your business is free from fraud or other illegal activity.
As you can tell, an internal audit can be a thorough, in-depth, comprehensive look at all of your business documents, records, processes, and accounts. What if you run a small business and just want to make sure you're not the victim of fraud? Focus on these key areas:
Take the process a step farther and bring in an outside auditor. The process doesn't have to be expensive or too time-consuming. Have an accounting professional audit your books and your basic financial processes. Ask for what some people call a "fraud audit" instead of a general audit; let the auditor know you specifically want to ensure that no illegal or fraudulent activity is taking place. A fraud audit is much less expensive and takes a lot less time than a general, comprehensive audit.
Perform your external audits on an annual but irregular basis; that way no one will know exactly when the auditor might show up -- and won't be able to take steps to cover up fraudulent activity. Employees may be tempted to steal from your company if they feel no one is looking or will look. An external audit could be the ounce of prevention that creates a pound of cure.
Don't just leave it to external auditors perform your own internal audits as well. Not only will you avoid fraudulent activity, but you'll also gain a better understanding of and day-to-day feel for the operation of your business.
The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.