Internal audits are an important process for businesses to go through and this should be done on a regular basis. Not only will an internal audit ensure that you are in a strong position when externally commissioned audits are carried out, but it can also help a company to keep their accounts up to date, find ways to improve their finances and prevent internally enabled fraud.
So, how should an internal financial audit be carried out?
Review Accounting Processes
First, you need to look at the accounting systems and processes. The first step in the cycle is gathering financial information including receipts and invoices, so you need to make sure that there is a clear system in place and software is used to detect mistakes.
Evaluate Data Storage Procedures
You should also check that electronic records are all on file and easy to find, including organising data into subfolders. In addition to this, you also need to make sure that the data storage procedures in pace are in line with the Data Protection Act including customer data only being stored for as long as necessary.
Compare Internal & External Records
It is vital that the financial information that is internal and extended (presented to shareholders and other relevant parties) matches. This will involve checking that figures listed on internal reports mirror those presented to external organisations and comparing receipts from suppliers with the internal records of transactions.
Assess the Current Threat
One of the most important steps to take with an internal audit is to gauge the current threats of risk and fraud. You need to look at what controls are being used to safeguard against risk, including what vulnerabilities there are and how they are dealt with. It is also important to establish who has access and control over financial data and what processes are in place to prevent theft and fraud.
Look Through Tax Returns
You should also go back through the company’s tax returns to check that reports line up with the internal records of tax paid paying close attention to expenses and annual revenues.
For those conducting an internal audit, these are the key steps to take that will help you to get a clear overview of your financial procedures and practices. This will help you to prepare for any external audits that are taking place and prevent any nasty surprises as well as help you to find ways to make improvements and know that your finances are all above board.
