The proper functioning of a company, in addition to organizing the processes and activities linked to its core business, also depends on the correct execution of administrative procedures, often bureaucratic and regulated by complex laws. For this reason, it is not always easy to maintain the regularity of the business, as many technical issues may be involved in its operation. This is where internal audit is so important.
Internal audit is a strategy adopted by companies to maintain visibility on their processes, ensuring compliance and the rigor required by the standards. In practice, this audit is a kind of “x-ray” of the business, which serves to assess and identify risks and inconsistencies that can hinder the progress of activities and the growth of the company.
Given the relevance of internal auditing in the corporate context, we have prepared this article showing how this measure can boost the results of a business. Continue reading and understand better about the topic!
What is internal audit?
In a simplified way, the internal audit can be understood as a set of assessments, based on pre-established criteria, whose purpose is to certify that the company meets these parameters.
Therefore, the audit is a planned evaluation, usually carried out by individuals who are not directly related to the audited business or sector, to verify that all the defined criteria are being met by the company.
The internal audit can fall on different activities of the business, as is the case of finance, accounting and tax sector, Human Resources, among other areas. It all depends on the need and objectives of this expedient.
In a practical way, in general, the internal audit materializes in the companies based on face-to-face assessments, an opportunity in which the auditors analyze documents, books, commercial records, contracts and even the company’s computerized systems. The idea is to do a complete check, so that no failure goes unnoticed and can harm the business in the future.
What is the importance of internal auditing for a company?
As we have seen, it is quite clear that the audit has a great impact on the image of the business. This is because audited companies tend to be more transparent in their activities, presenting no risks or eventual problems with compliance. Therefore, the image that this company gives to the market and competitors is much more positive.
However, the importance of internal auditing goes far beyond the aforementioned requirements. In reality, there are several other benefits that can be mentioned. Internal Audit and control system reviews in UAE!
Increases business credibility
Internal audit is a typical means of preventing errors and inconsistencies in the company’s management processes. Thus, it is natural that businesses that undergo frequent audits are less likely to suffer from sanctions and penalties for not complying with the expected standards according to their line of business.
At this point, then, there is a great reinforcement in the company’s credibility, which is unlikely to have its name involved in lawsuits, administrative proceedings and investigations related to tax fraud, labor, for example.
Improves operational and managerial efficiency
As stated, the internal audit has the purpose of guaranteeing the regularity of the company. To this end, it takes care to ensure that all processes are in compliance, free from any problems, be they legal, book-entry or operational.
Thus, another point that demonstrates the importance of auditing for companies is the improvement in internal efficiency. By undergoing periodic evaluations, the company is able to impose greater rigor on its finances, transactions and obligations before public agencies.
For example, errors in bookkeeping and compliance with tax obligations can be identified in due course and can be corrected without generating problems such as the Tax Authorities.
Enables risk analysis
It is worth remembering that, due to the bureaucracy and high technical level of some administrative processes, small companies, mainly, tend to make mistakes without even knowing that this happens. At this point, a specialized audit could avoid this type of situation, putting the business on the right axis, in order to grow in full compliance.
Risk analysis, in this context, is one of the pillars that support the activities of a healthy business. Through assessment files, preventive checks on the company’s operations and documents, for example, the internal audit helps managers to identify weaknesses in the operations, managing and eliminating sensitive risks that, in some way, can compromise the success of the business.
In summary, it is necessary to make it clear that one of the main functions of the audit is precisely to enable good risk management, dealing in a conscious and precise way with each one of them.
Increases the business focus on your core business
In the midst of the countless processes that make up a company’s day-to-day operations, in many cases, it is quite difficult for managers and leaders to follow everything closely, as it should be. This reality leaves room for errors to happen and end up causing inconvenience and delays to the growth of the business.
On the other hand, by adopting a policy of internal audits, the company is better able to focus on its main activities, leaving the bureaucratic part of evaluating documents, records and legal obligations to the responsibility of specialized third parties, as is the case of consultancy that provide audit services.
This attitude is essential to minimize operational and managerial risks, identifying points of attention that can be quickly corrected, avoiding damage to property with the payment of fines, or even major catastrophes, for example.
It works as a competitive differential
In an increasingly competitive business scenario, companies cannot afford to make mistakes and miss opportunities to grow. At this point, anticipating risks and problems, in addition to identifying possible areas for performance improvement is very important for businesses that wish to operate in a differentiated and competitive manner in the market.
In this sense, the internal audit emerges as a great differential in the market. Through a good audit, for example, the company has the possibility to remove bottlenecks in its processes and identify points where capital is wasted. In other words, the audit can act as a strategy to make an organizational and process reengineering, identifying and eliminating everything that does not contribute to the sustainable development of the business.
Finally, as it was possible to see, the internal audit is an expedient of great value in the corporate scenario. As mentioned, to make a business grow it is not enough to focus efforts on operational activities. More than that, it is necessary to dedicate time and resources for the fulfillment of obligations, maintenance of a good bookkeeping and documentation of activities, all to improve the transparency and quality of the company’s management.
At this point, the audit helps to ensure all this rigor, thus increasing security for healthy growth.
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