Why do auditors need to understand the organizational structure of the business
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People often ask: is an internal audit necessary? What if we’re a smaller organization, should we be spending our already limited resources on an internal audit program? Show
If your clients depend on you to provide efficient, compliant, and secure services, then the answer is a resounding “yes”. Internal auditing is an important function of any information security and compliance program and is a valuable tool for effectively and appropriately managing risk. Are we ensuring we are doing what we say we’re doing? Are there gaps in our policies and procedures? Are there any areas for improvement? Are we meeting our compliance goals? These important questions are addressed through internal auditing. What is the Purpose of an Internal Audit?According to the Institute of Internal Auditors:
An internal audit is conducted objectively and designed to improve and mature an organization’s business practices. The purpose of auditing internally is to provide insight into an organization’s culture, policies, procedures, and aids board and management oversight by verifying internal controls such as operating effectiveness, risk mitigation controls, and compliance with any relevant laws or regulations. 5 Reasons Why Internal Audits are ImportantInternal auditing programs are critical for monitoring and assuring that all of your business assets have been properly secured and safeguarded from threats. It is also important for verifying that your business processes reflect your documented policies and procedures. Let’s take a look at five reasons why internal auditing is important and its purpose in keeping your organization compliant with the common frameworks and regulations.
How Do Internal Audits Provides Objective Insight?You can’t audit your own work without having a definite conflict of interest. Your internal auditor, or internal audit team, cannot have any operational responsibility to achieve this objective insight. In situations where smaller companies don’t have extra resources to devote to this, it’s acceptable to cross-train employees in different departments to be able to audit another department. By providing an independent and unbiased view, the internal audit function adds value to your organization. How Do Internal Audits Improve the Efficiency of Operations?By objectively reviewing your organization’s policies and procedures, you can receive assurance that you are doing what your policies and procedures say you are doing, and that these processes are adequate in mitigating your unique risks. By continuously monitoring and reviewing your processes, you can identify control recommendations to improve the efficiency and effectiveness of these processes. In turn, allowing your organization to be dependent on processes, rather than people. How Do Internal Audits Evaluate Risks and Protects Assets?An internal audit program assists management and stakeholders by identifying and prioritizing risks through a systematic risk assessment. A risk assessment can help to identify any gaps in the environment and allow for a remediation plan to take place. Your internal audit program will help you to track and document any changes that have been made to your environment and ensure the mitigation of any found risks. How Do Internal Audits Assess Controls?Internal auditing is beneficial because it improves the control environment of the organization by assessing efficiency and operating effectiveness. Are your controls fulfilling their purpose? Are they adequate in mitigating risk? How Do Internal Audits Ensure Compliance with Laws and Regulations?By regularly performing an internal audit, you can ensure compliance with any and all relevant laws and regulations. It can also help provide you with peace of mind that you are prepared for you next external audit. Gaining client trust and avoiding costly fines associated with non-compliance makes internal auditing an important and worthwhile activity for your organization. Still have questions about developing your own internal audit program? Contact us today and let’s start building your internal audit program. More Internal Auditing Resources:6 Steps to Construct Your Internal Audit Program Chief Compliance Officer Series: Constructing an Internal Audit Framework CFPB Readiness Series: Developing an Internal Audit Process Why do you need to understand the organizational structure of the business?Organizational structure is important because it orders your organization to deliver value to a market. Your organization's value chain is the sequence of high-level operations that represents your core value-creating process. It is the translation of competitive strategy into activity.
Why is it necessary for the auditor to understand the way that the entity is structured and how it is financed?An understanding of the nature of an entity enables the auditor to understand the classes of transactions, account balances, and disclosures to be expected in the financial statements.
Why understanding business is important in audit?Business understanding is important for auditors in the following way, Auditors will be able to assess the risk of material misstatement more precisely. It helps the auditor to identify potential business risks. It enables auditors to understand if they can cover the risk and issue a clean audit report.
What is auditing and why is it important to an organization?The purpose of auditing internally is to provide insight into an organization's culture, policies, procedures, and aids board and management oversight by verifying internal controls such as operating effectiveness, risk mitigation controls, and compliance with any relevant laws or regulations.
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