Audits help businesses paint an accurate portrait of their systems and performance. When conducted internally, they can empower your business to identify your biggest weaknesses and capitalise on their biggest strengths.
Audits come in many forms and require comprehensive knowledge of effective systems, structures, and processes. BDO Whangarei is a leader in internal audit services across a variety of entity types and knows what it takes to deliver the insights and assessment your business deserves. Continue reading to learn more about the most common internal audits and how they can benefit your business.
The difference between internal and external audits
The critical difference between an internal and external audit is the person or group conducting it. External audits are conducted by third parties, or people who do not work for your company. The most widely recognised example of an external audit is an IRD audit, conducted by Inland Revenue to ensure your company is compliant with New Zealand tax laws.
Internal audits are conducted by people who work within your company or by people you hire specifically for this purpose. Internal audits tend to carry with them less legal or regulatory enforcement authority and are instead conducted to ensure the business is running smoothly and in accordance with agreed policy and procedure. Internal audits are helpful for businesses to sniff out inefficiencies, and noncompliance and to highlight key risks within a particular business function.
Types of internal audits
Internal audits can be conducted to examine many different business systems.
1. Compliance audit
Compliance audits are conducted to ensure your business is acting in accordance with applicable regulations and laws. These audits can look at record-keeping practices, accuracy of supporting documentation, and tax filing, among other aspects. The goal is to ensure that your business is not vulnerable to fees or penalties for noncompliance.
2. Financial audit
Financial audits examine your planning and reporting processes to ensure that financial reports and statements are accurate and thorough. Processes are examined to identify weak points that could lead to inaccuracies or lost financial data.
3. IT systems audit
IT systems require regular audits to ensure that changes to your business and the information security landscape have not exposed weaknesses in your systems. Audits are crucial to minimise your risk of hacking, data breaches, or system failures. IT system audits examine your software and cloud-based programs, data processing systems, and computer and server setups to ensure your information is secure.
4. Financial cycle & project audits
Financial cycle audits are best conducted on a rolling basis or where you have had a change in systems. Topical audits include payroll (especially pertinent in light of the Covid-19 outbreak and compliance with the wage subsidy), procurement, and accounts payable. Project audits are useful in the context of a large capital project or investment. The great thing about internal audit is that management can direct them to where they perceive the largest risk to the business.
5. Operational audit
Operational audits examine your business’s workflow, from your customer relations to your vendor examinations, to identify wasteful expenses or underutilised resources. These audits will measure performance output and resource allocation to maximise workflow efficiency.
Look closer with specialist audits
These are just a few of the most common internal audits that New Zealand businesses carry out regularly. By working alongside assurance professionals, you can take comfort from a tailored internal audit programme to best respond to the key risks applicable to your business. Our experienced team at the BDO Whangarei office conduct internal audits, applying a proven methodology which is compliant with relevant professional standards to deliver unparalleled insight and assurance for your business. Contact the BDO audit & assurance team today to discover what your business has been missing.