The SEC( U.S. Securities and Exchange Commission) and the PCAOB( Public Company Accounting Oversight Board (PCAOB)) are both applying increased pressure to companies, both established and Startups along with independent auditors. When the PCAOB reviewed the results of recent Big 4 audits, they found up to 50 percent of them turned up internal control deficiencies that could be considered significant. Weaknesses which once went undisclosed now have to be reported in amended filings. The SEC has even taken action to discipline executives who are responsible for problematic internal controls. If you want to make sure that your own organization comes up clean in an external audit, it’s vitally important to have strong, well-documented procedures in place for upholding and testing your own controls.
Internal auditors tend to make the same critical mistakes. If you want to get more out of the internal audit process, keep these five key points in mind:
1) Remember To Add Value
Audits naturally involve taking a very detailed look at your procedures. Make the most of the time you have to devote to the audit process by refraining from micromanaging the audit. Instead, look for ways in which you can speed the process along and make it more efficient. Set up an effective workflow and stick with it for the duration of the audit.
“Don’t buy value-added. Be the one adding value. Create goodwill.”Ehab Atalla
2) There’s No Such Thing As Too Much Planning
The better planned your audit is, the less chance there is of wasting your time. Start planning early so that you’re not caught unawares. Remember that your overarching goal is always to identify and then resolve the key problems you’re facing. Check out this example from Barclay Simpson.
As Scott M. Gimple famously said “You can do irrefutably impossible things with the right amount of planning and support from intelligent and hardworking people and pizza.”
3) Embrace A Wider View
One of the best ways to help your auditing team is to overhaul your documentation and reporting processes. Besides making it easier for your auditors to find information, this will also increase overall transparency and improve your efficiency continuously. Aim for automated reporting processes that update themselves rather than time-consuming number-hunting.
4) Keep A Tight Grip On Scope
Do your best to expect the unexpected. Set up rudimentary procedures for dealing with unexpected developments that may come to light during the audit.
5) Boil Down Your Results
Few executives have the time in their schedules to plow through thousand-page audit reports. Make sure your team produces intelligently summarized reports that give prominence to the actionable intelligence you need. Don’t abandon any data; just make sure it’s presented in an efficient and manageable fashion.
You’re pressured more than ever today to maintain a firm grip on your internal controls. Heed this advice for internal audits so that you get the most out of this analytical exercise.