Business organizations do not always face risks and threats from external bodies or competitors. At times, there are employees who sabotage the agenda and purpose of the organization, commit fraud and cause irreversible loss. Such matters can make the general public lose their trust in the organization. This is why organizations need to conduct internal audits to improve controls and deal with such risks.
Internal teams can also organize internal audits. However, the process will lose transparency and authenticity if they choose to side with the fraud. This is why organizations prefer to hire experts from professional audit companies and ensure everything is handled with complete transparency and fairness. Learning about the types of internal audits can help you assess which is suitable for your setup.
Keep scrolling down into the details of this article to get your hands on internal audit types you should know about to boost the functioning and performance of your organization.
Top 6 Types of Internal Audit You Must Know
Internal audits are conducted under the direction of the higher management of the organization. The purpose of such audits is to identify and fix all the loopholes in the functioning of the organization, which can raise concerns from external auditors. There are various types of internal audits, which focus on a specific area of the organization and intend to improve its functioning.
Here are the major types of internal audits you must know about and conduct in your organization to improve performance and functioning.
1. Compliance Audit
A compliance audit is the first and foremost type of internal audit you should know about. Every organization is required to adhere to the local laws, government regulations, policies, and compliance needs. Sticking to such terms ensures the overall progress of society and boosts the reputation of the organization too. Compliance audit helps organizations to review the arrangements and ensure they are not committing mistakes. Many organizations hire audit firms in UAE and let experts conduct compliance audits to provide air feedback and suggestions.
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2. Information Technology Audits
Information technology audit is the type of internal audit that has become fairly common in this era. Every organization relies highly on information technology and advanced practices for routine work. Information technology audits focus on reviewing the technology controls, security measures, backup management, hardware, software, and security planning of the organization. Such an audit can be organized to assess the overall standing of the organization or to deal with external complaints or lawsuits etc.
3. Performance Audit
Performance audit is the next type of internal audit an organization can conduct. As the name suggests, this type of internal audit is focused on assessing and reviewing performance. It could be of an individual, team, or department. The internal audit team can review if the specific person or department is utilizing the resources and skills with the best intentions. Performance audits can also be conducted to ensure the achievement of metrics and offer bonuses or incentives to the workforce.
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4. Internal Financial Audit
An internal financial audit is the next type of internal audit an organization should be aware of. Financial independence, transparency, and strength impact the overall growth and development of the organization. While a business setup may believe they are heading toward progress, a fair review and assessment from the audit team can help identify the loopholes in your business progress. The third parties can provide better insight and help prepare for internal and external audits by the government, which may otherwise negatively impact their reputation.
5. Environmental Audit
An environmental audit is one of the most important types of internal audit every organization should conduct regularly. Climate change is causing havoc across the globe, and the issue has not emerged out of the blue. The production practices, waste management, delivery, and logistics management of business organizations have added fuel to the problem. The environmental audit helps organizations identify the impact of their practices on the environment and adopt the measures to make it safe and bearable. It will not only improve the reputation of the organization but contribute towards saving the environment too.
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6. Operational Audits
An operational audit is the last type of internal audit you can conduct to boost the performance of your organization. Such an internal audit takes place when there are changes in the operational unit or team. The purpose of an operational audit is to assess the effectiveness of the implemented structure and policies, as well as the way the heads operate the organization. It is meant to explore if the strengths and assets are being fully utilized or not. You can contact audit firms in UAE to organize an operational audit and utilize the insights to boost overall performance.
Are you struggling to conduct an internal audit?
Having complete faith in the fairness of the auditors is crucial to deal with the matter efficiently. Instead of relying on internal teams, it is much better to consult experts for the process. Make sure to contact professional audit firms and get trained internal auditors on board to review and assess the functioning of your organization and share valuable feedback for future improvements.