Need of Internal Audit Plan:-
Every business requires an assessment after a period to determine its alignment to the set objectives. To achieve your organizational goals and address critical business risks, you need an internal audit plan. It is especially critical for small and upcoming businesses.
The internal audit procedure is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The procedure covers all aspects of the business including internal controls and operations.
Most firms take an annual internal audit plan and use it to assess their success. The audit should remain honest and independent if it should be of help to the firm.
Here is a basic Internal Audit Procedure that is very effective:
1. Risk-Based Audit Plan
The Plan is a guideline for conducting audits in future. The assessment should cover all areas of the firm.
2. Planning Phase
After evaluation of past audits, a new internal audit plan is devised. The objectives, timelines, and scope of the audit are considered.
3. Fieldwork Phase
The audit staff gathers information about the staff’s operations, gains an understanding of the unit’s functions, and identifies both strengths and weaknesses. This phase allows the audit staff to identify areas of risk and concern in the unit’s internal controls and procedures
All fieldwork results are compiled, presented and discussed with the business. The firm must provide action plans with timeframes that address all recommendations
5. Follow-up Phase
Based on timeframes in the action plans, a follow-up is performed to ensure that the required measures have indeed been implemented.
The purposes of an Internal Audit are:
1. Risk assessment
The internal audit procedure assists management in identifying and prioritizing areas or processes that require attention and audit focus.
2. Process walkthroughs and documentation
Gaining an understanding of the processes and procedures as they currently exist.
3. Control assessment
Identifying gaps, also known as “trouble spots,” where procedures and controls are not properly designed.
Performing tests of controls to verify whether controls are working as designed.
Providing observations and recommendations to improve processes and controls.
Top 5 Benefits of an Internal Audit Plan
- Improves the “control environment” of the organization
- Makes the organization process-dependent instead of person-dependent
- Increases accountability within the organization
- Serves as an Early Warning System, enabling deficiencies to be identified and remediated in a timely manner.
- Identifies redundancies in operational and control procedures and provides recommendations to improve the efficiency and effectiveness of the procedure.
Every business aim is to make a profit and therefore an area that is a barrier to the objectives of the firm should be eliminated. An internal auditing process gives a report on the internal structure of your business. Make it independent and it will work for you.