Bogged down by the time-consuming nature of the audit, your company’s internal auditors even often suffer from ‘Audit Exhaustion.’ But all it takes is to pick the best approach to make a difference by allowing the consistency and smooth flow of the internal audit process.
So, for implementing a risk-based method for your Internal Audit, involve these five steps:
1. Plan and Identify Risks:
This begins with developing and confirming your understanding of the business’s management. It helps to define the reach of the services of your company. Evaluating internal control at the entity level and defining and recognizing business and other risks is one of this phase’s key components (including IT environment complexity and fraud risks).
2. Risk Assessment:
To determine the organization’s financial reporting risk, current expertise, especially in business-critical areas, plays a great deal. This move helps early recognition of problems and their effect on the business and provides time for a comprehensive review to set up a robust risk response system.
3. Internal control evaluation:
Effective internal controls are essential to a functional organization. They ensure that the required precautions have been put in place to ensure that financial statements’ goals are effectively achieved. At this point, current internal controls are reviewed and, if possible, solutions are proposed to minimize the likelihood of financial inaccuracies or misrepresentations.
4. Audit Testing:
The audit testing method includes drawing up the company’s understanding and risk evaluation. This phase may consist of control testing, journal entry testing, other required fraud procedures, substantive account balance and transaction procedures, and general audit procedures. For providing a smooth audit, continuous communication is essential.
Now comes the engagement’s wrap-up phase. Examination reports or audit opinions on financial statements and management letters are the main deliverables in this process to bring major audit, system, and control problems to attention. Companies should also ensure that they collaborate with auditors who conform to frameworks established by International Auditing Standards and provide a rigorous audit approach (ISA). This requires a particular emphasis on ethics, confidentiality, preparation, and documentation.
