Medical visits help us obtain reasonable assurance on the status of our health – when visiting a doctor, we can find preventative steps to take or corrective measures to remedy a health concern. For example, a doctor might observe your blood sugar is high and warn of the risk of prediabetes, encouraging you to cut back on sugar.
These benefits are the same for consulting with an internal audit professional. Organizations face instances where a consultation with an internal audit team can improve its health, such as during times of an acquisition, growth in operations, and changes in the industry. By allowing internal auditors to collect vitals within a company and run tests, leadership can obtain further confidence the organization is healthy.
From a business and risk perspective, having a periodic check-up with an internal audit professional has a wide array of benefits, including:
Understand the Health of the Organization
When you visit a doctor for a physical, you’re there to get a current assessment of your health. As a patient, you are either instructed about areas of health needing improvement or given confirmation that all is well. Internal audits are conducted with the same purpose. Internal audits are designed to test business processes to provide organizations with reasonable assurance that risks are identified and adequately mitigated to reduce the possibility of loss. Performed correctly, internal audits can provide assurance that processes function appropriately and/or list items that require preventive maintenance to strengthen the environment.
Detect Significant Health Concerns and Defects Early
Medical professionals will recommend you don’t let health issues fester, as they are likely to only get worse. However, people often ignore health concerns for several factors, like fear, lack of availability and cost. Businesses, on occasion, do the same. Much like a subtle cough, when risks within an organization go unaddressed, issues grow. Organizations that don’t perform an early risk assessment may run into these challenges. For example, an area such as vendor management, may be deemed as low risk, and controls are overlooked and don’t get implemented. If a reassessment and testing are not completed, problems that might exist will continue to mature.
Understand if the Current Controls are Effective
A doctor, during an initial assessment, is likely to ask about the medications and supplements you currently take. While performing this pre-screening assessment, the doctor works to understand if your medications and health remedies are having the expected results. For example, if an individual takes allergy medication and still has significant symptoms of allergies, a doctor may recommend upping the dosage. Internal auditors work to understand clients just the same. They identify risks and health systems within your organization, then monitor the current control environment. If an organization has been growing substantially, then the dosage of internal controls may need to be enhanced to cover the growth in risk.
Preventative Treatment Costs Less
Medical issues are more expensive when given the opportunity to snowball and grow. This logic applies to organizations and the risks, both internal and external, it faces. While a completed risk assessment and internal control testing has a cost, it is significantly lower than the potential of inadequate evaluations of the effectiveness of risk management, control and governance processes. Take fraud for example – a significant risk all organizations face. Fraud has a higher chance of occurring when a company has gaps in its internal controls. The Association of Certified Fraud Examiners (ACFE) reports that organizations worldwide lose 5% of revenues due to fraud. Would a 5% loss in revenue be greater than the cost of utilizing an internal audit to assess updated risks?
Upgraded Tools/Methods of Assessment
At each annual doctor’s visit, you may notice upgraded medical devices and tools. These newly purchased items are utilized to help the doctor gauge the most accurate and timely results of your health. The same logic applies to internal auditors, who spend time attending industry presentations, networking with colleagues, reading articles, and obtaining state-of-the-art tools to aid in testing, such as data parsing tools. This effort made by internal auditors is to ensure we are up-to-date on best practices and can provide optimal services to businesses.
Whether it is a check-up from the doctor or a visit from an internal auditor, third-party evaluations of your “health” is always a good resource to have in your arsenal. Having an internal auditor perform a third-party evaluation of your organization serves several health benefits. Much like a doctor, periodic health assessments should always be performed, and reassessments should be leveraged when known risks or changes are recognized in an organization.
The key to identifying control weaknesses is through a third-party perspective. For more assistance, please contact our team at Sikich, where we offer expansive internal audit resources and capabilities: