More and more organizations are using an internal auditing process to identify improvement opportunities.
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.
Businesses use policies and procedures to maximize efficiency and create consistent practices.
However, policies and procedures are only as effective as an organization’s ability to enforce them.
An internal auditing process helps ensure policies and procedures are followed and noncompliance is reported to management for corrective action.
Policies are often written to ensure an organization is legally compliant, but policies also ensure consistency in practice and quality of internal processes and services.
Quality management systems use auditing to measure compliance with internal policies and procedures.
All business processes should be audited for compliance.
9 Areas Your Organization Should be Auditing
1. Cash Handling
This makes it crucial to inspect how cash is handled within the organization.
Areas within an organization that deal with cash registers, petty cash, or money transactions should be audited to ensure compliance with internal cash handling procedures.
2. Credit Card Usage
Credit card use in small business is becoming more common because of its ease of use and necessity for internet purchases.
Ensure accountability for credit card usage by auditing for compliance with spending policies.
When auditing, make sure you audit all credit card statements and ensure that all purchases have a business purpose explanation.
3. Vendor Billing
Vendor bills should be verified and approved for payment. This is done to ensure that vendor charges correspond to the service provided.
Billing errors are common so it is important to double-check the accuracy of all vendor invoices.
4. HR Compliance
There are many laws that govern the HR function.
Organizations should be aware of those laws and have auditing procedures in place to ensure that the HR department is legally compliant and maintains accurate employee records.
5. Budget Control
Budgets are only as good as the process that manages them. A budget review process can monitor budget spending and oversee large expenditures.
Management should be aware of how budget dollars are spent and of any budget variances.
6. Process Improvement
Organizations improve how their products and services are delivered by focusing on improving internal systems and processes.
When these processes are changed, as part of the quality improvement initiative, ongoing monitoring of new processes helps to ensure compliance with improvement effort changes.
7. Customer Service
Auditing the customer service function can help determine training needs, customer expectations, and improvement opportunities.
8. Vendor Comparisons
It is easy to fall into the vendor “relationship” trap.
There should be strict conflict-of-interest policies that determine how the purchasing function interacts with vendors.
This area should be audited to make sure multiple bids are submitted for large purchases to ensure the organization is getting the best value for its money.
9. Cost Savings
All organizations are being challenged to do more with less. This means reducing spending and managing costs.
Use the FOCUS PDCA methodology to identify cost savings opportunities by improving internal processes for how work gets done.
Internal auditing is how many organizations improve the way they do business.
Spend the time and resources to track how work is done and use what is learned to improve quality, save money, and manage employee performance.
What internal processes does your organization audit?