What is an internal auditor?
An internal auditor is a trained professional who provides independent, objective evaluations of a company’s financial and operational processes. Internal auditors ensure businesses comply with government regulations, abide by laws, follow mandatory procedures, and operate effectively.
Many companies leverage audit management software systems to streamline their auditing procedures. These tools can simplify the audit processes and assist in complying with regulations or internal policies. Audit management software is most often used in heavily regulated industries such as chemicals, pharmaceuticals, health care, or food and beverage.
What process do internal auditors follow?
Although internal audits vary based on an organization’s needs, industry type, and other business requirements, there is a standard process internal auditors follow. The five-step audit process consists of:
- Selection: Key business stakeholders and the internal auditor must select which business activities to audit. Members of leadership and management, a board, or other approving authorities can be a part of the selection process.
- Planning: During the planning phase, stakeholders should define the audit's scope, purpose, timeline, and logistics for obtaining access to documents and other materials.
- Fieldwork: In this phase, internal auditors analyze data and business materials, conduct interviews, review laws, conduct surveys, and evaluate the business based on the defined audit scope. Internal auditors may meet with leadership and management throughout fieldwork to share preliminary findings on their results.
- Reporting: At the end of an audit, internal auditors meet with management to discuss the final results, specific findings, and recommendations for consideration. Auditors might ask management to prepare a corrective action plan to share with the internal auditor for review.
- Follow up: An internal auditor may follow up on the status of a corrective action plan or other recommendations in an audit report to ensure the business implements changes accordingly.
What skills do internal auditors need?
In addition to educational requirements, training, and certification programs, internal auditors need hard and soft skills to succeed in their roles. These skills include:
- Attention to detail: An internal audit is most effective when a detailed auditor is accurate and thorough in reporting. Internal auditors should be able to examine a large amount of data and information with precision.
- Communication: Internal auditors work with many stakeholders throughout the audit process. They should be able to communicate clearly and effectively across a broad range of stakeholders.
- Organization: Strong organizational skills help an auditor keep documentation, statements, and information cogent and accessible throughout the audit process.
- Analytical abilities: Internal auditors first have to review data to identify issues and then be able to recommend plausible solutions.
- Risk management: An excellent internal auditor can identify risks and help mitigate them. This requires a deep understanding of how to implement risk management practices effectively.
Benefits of internal auditors
Many businesses employ internal auditors without being legally obligated to do so because of their benefits. These benefits include:
- Reduced risk: Internal auditors strive to identify problem areas and company risks before an external auditor discovers them. When businesses follow the recommendations of an internal audit, they lessen their risk of penalization and fines by external auditors.
- Better compliance: During a compliance audit, internal auditors check procedures and policies to ensure an organization acts in accordance with laws, regulations, and industry standards. Internal auditors can find areas of improvement that a business may not have caught otherwise.
- Improved operational efficiencies: Internal auditors can spot redundancies and overly complex processes when conducting a thorough review during the audit process. As part of an audit, they generally recommend how to streamline procedures and save time and money.
- Increased financial integrity: Audits that include a review of financial statements can increase the integrity and validity of an organization’s data. Businesses use internal financial audits to improve internal controls and ensure financial records accurately reflect financial numbers.
- Increased accountability: Since internal auditors provide independent evaluations of a business, they can hold the organization accountable for its actions. Likewise, team members may feel more inclined to follow proper procedures when they know an audit will occur.
Internal auditor vs. external auditor
Businesses hire internal auditors to evaluate the company and obtain more compliant and efficient recommendations. They generally work for the business they audit.
External auditors are independent of the companies they engage with. They determine whether the business fairly and accurately reported its finances on the financial statements.
Alyssa Towns
Alyssa Towns works in communications and change management and is a freelance writer for G2. She mainly writes SaaS, productivity, and career-adjacent content. In her spare time, Alyssa is either enjoying a new restaurant with her husband, playing with her Bengal cats Yeti and Yowie, adventuring outdoors, or reading a book from her TBR list.
