How will a business ensure its financial records are correct and reportable? Well, by conducting a detailed internal audit. Besides the financial records, the administrative/legal standards of the company are also cross-checked. Every small business is subjected to some regulations by the respective authorities. Under all circumstances, companies have to follow the mandates decided by the respective authorities. Therefore, internal audits are beneficial to develop internal and financial control within the organisation. Why wait for a third party to conduct audits when internal audits can help maintain compliance standards? Read on to understand more about internal audit services for small businesses.
Internal audit: definition
Companies follow federal or regional laws imposed by the authorities. From accounting standards to administrative rules, there are many regulations for companies. The concerned authorities will always find companies that stay non-compliant. Companies should know what happens when they are non-compliant with federal laws. A small business might be subjected to harsh monetary fines for failing to follow the business rules. Besides the financial punishment, the license/registration of the company might be disregarded by the concerned authorities. Authorities themselves conduct audits on companies to know their compliance standards.
Why wait for an authority to detect a flaw in the finances or the company administration? An internal audit can help companies determine their current compliance status. Businesses are always at risk for audit inspections from the authorities. Since small-scale enterprises are trying to boost their market share, they might ignore internal audits. By doing so, they might land themselves in trouble. Consider an internal audit as a checklist to monitor a business’s finances, administration, and legality. No authorities are involved in completing an internal audit. Different departments within the organisation are responsible for conducting an internal audit. Sometimes, companies also depend on reliable third parties to conduct internal audits on their behalf. Internal audits can be considered as a preparation for federal audits and compliance checks from the respective authorities.
Now that you understand internal audits for small businesses let us discuss the procedure.
What falls under an internal audit?
Business processes, administrative tasks, day-to-day practices, and many other aspects of a company are cross-checked via an internal audit. Different types of internal audits required by small businesses are as follows:
- Compliance audit
With a compliance audit, small businesses can ensure that they follow all government mandates. Since any non-compliance issue can lead to a monetary punishment, small businesses can know them in advance with an internal audit. IFRS compliance, POSH compliance, and many other standards are checked via an audit. The financial and accounting practices are also monitored via a compliance audit.
- IT audit
Small businesses rely on their IT infrastructure to offer services to customers. However, there are certain data sharing and storage regulations for small businesses. An organisation having access to sensitive customer data should also take responsibility for it. An IT audit can cross-check the integrity of databases and software systems.
- Administrative audit
With an administrative audit, the internal control of a company is evaluated. A small business will determine the management’s control over the employees. Is the management exploiting the employees? Is the management keeping aside employee interests for personal gains? Many such questions are answered via an administrative audit.
- Environmental audit
A small business cannot harm the environment with its operations. If authorities catch a small business polluting the environment, it might be slapped with a huge fine. An environmental audit is performed to ensure that the business activities do not harm the environment.
Besides the aforementioned internal audits, there are many other types. For example, performance audits are preferred by many small businesses to review the existing protocols.
How to look for internal audit services?
Are you a small business searching for internal audit services? The best option is to find a reliable third party to conduct internal audits. A small business will have to incur training and hiring costs by hiring in-house auditors. Often, small businesses do not have the funds to spend on in-house auditors. Outsourcing internal audits allows a small business to free in-house employees for other activities. A reliable CA firm can provide small businesses with the best internal audit solutions. Start making an internal audit strategy to boost continuity in 2022!