An audit is commonly regarded by the UK business community as a necessary obligation only required for mandatory external audits – a process of inspecting and verifying the authenticity of statutory accounts and reports.
However, internal audit services can be an incredibly valuable tool to help companies progress, seize opportunities, and recognise areas with growth potential by leveraging the expertise of local accounting firms.
As an auditing company, we often explain to clients that having an audit conducted should never feel punitive or stressful. Instead, a talented team of auditors can identify competitive market advantages, recommend strategies to protect asset wealth and stakeholders’ interests and deliver independent insights to help with informed decision-making.
How Can an Internal Auditing Company Add Value to Commercial Operations?
Auditors are given a position of examination and assessment – they act on behalf of a business to unpick the way a company performs and manages its activities, reporting on outcomes to key stakeholders.
One of the key roles of an internal auditor isn’t to look for mistakes or determine inaccuracies but to find added-value insights that UK business owners can use to adjust their thought processes or to pivot their focus to address a range of important considerations.
Elements of an internal audit might include:
- Appraising the approach given to risk control, looking at the details of the risks that exist, and whether the tactics deployed by the company sufficiently protect their potential.
- Providing an objective evaluation of opportunities and future success while pinpointing existing barriers to market positioning.
- Advisory services, consulting with business ownership and leadership teams to assess the elements most relevant to decision-makers and creating a detailed statement of their findings.
An internal audit is an exercise in objective assurance. Whether a business has the resources to employ a standalone internal audit team or wishes to appoint an independent audit service to conduct internal audits, the primary aim of the audit function is to put the business in a prime position for success.
Choosing a Suitable Type of Internal Audit
There are various ways to audit a UK company, depending on the business’s lifecycle stage, objectives, market position and concerns.
When deciding on an internal audit service, firms should consider their goals and where governance processes and functions would most benefit from appraisal and improvement.
- Internal audits can be assigned to an outside service offering internal audits or covered by permanent internal audit departments, presenting findings to the board of directors or management committees to share outcomes and recommendations.
- An IT audit looks at the technical infrastructure of the business and how it controls information, data flows and storage requirements.
- Financial audits look at the way the business verifies the accuracy of tax transactions and reporting figures, such as how it calculates the real-world tangible value of inventory, adjusts estimates and forecasts, and identifies cash flow shortages.
Each of these audit categories differs from an external audit conducted by an independent auditor – although an auditor accredited by the UK Association of Chartered Certified Accountants may offer both external and internal audit services.
Internal Audit Processes and Regulatory Compliance
Millions of firms have an imperative need to adapt the way they approach compliance with ever-evolving standards. Those standards could relate to quality controls, data protection, reporting guidelines, or legal requirements.
Internal audits are focused on more than just accounting reports, statutory declarations and tax returns but on the processes, policies and strategies that underpin how a business functions.
Auditors can give consideration to how well an organisation is complying with new or changing regulations or help create a plan to ensure owners and leadership teams have a clear action statement to improve market concentration.
Risk prevention and controls are an important aspect of the internal audit process. Since auditors act as independent professionals, they are a step removed from the complexity of running a company and are in a good position to see things objectively.
Internal audit providers may be tasked by their clients with appraising a full range of functions or auditing the business risks related to:
- Efficient use of balance sheet assets and workforce capacity.
- Controlling finances and cash flows.
- Protecting the brand, reputation and revenues.
If the business has current risk controls in place, the auditor can review the way the company handles risk and stress-test controls to determine whether they are sufficient. They may also offer financial advisory services where auditors believe that more robust controls would be beneficial.
What Is the Benefit of Commissioning an Internal Audit?
Undertaking an in-depth audit process is advantageous for all stakeholders involved with a business, from shareholders to owners, employees and customers. Shareholders may also require a company to provide an internal audit statement every fiscal year.
Audits provide assurance that the organisation has the necessary oversight to make informed decisions, implements best practice protocols and recognises where weaknesses require attention – and when opportunities are there to grasp.
Addressing exposure to issues such as inaccuracies in financial records can provide long-term positive outcomes by implementing safeguards to close vulnerabilities. At the same time, managers can offer assurance that they are following industry-specific guidelines.
In some sectors, an internal audit statement is also one of the requirements to meet good quality benchmarks, where organisations need to audit their adherence to standards linked to healthcare record-keeping or health and safety legislation, for example.
The internal audit process should be seen as an ongoing collaboration rather than a one-off assessment of the company and its controls.
Companies that instruct the same internal auditing company to revisit their processes periodically have the benefit of dealing with professional auditors who are familiar with the organisation’s background, can expedite each visit, and provide custom advice and support as the business grows.
For more information about the audit assurance process, assessing your business financial health, our full range of audit services, or how regular internal audits can help your company with preparation for changing regulatory requirements, please get in touch with James Todd & Co. at any time.