An internal auditor could benefit your company no matter what sector you’re in. There is always room for improvement and with technology constantly advancing, an internal auditor will keep your company up to date and working efficiently.

What does an internal auditor do?

An auditor, whether internal or third party, acts as a fresh pair of eyes. Their main duty is to review processes and the day-to-day working of a business to check that necessary protocols are being followed.

Hiring an auditor is the perfect way to ensure that your business is working as smoothly and efficiently as possible.

Among other responsibilities, an auditor’s job includes:

• Ensuring that financial records are in order and taxes are being paid on time
• Observing how effectively and efficiently processes are being carried out
• Identifying any potential risks in such processes
• Making sure that your business’s output is of a consistently excellent standard
• Suggesting ways in which your company can reduce costs and enhance profits

See also: Are you getting a good audit?

How should you hire an internal auditor?

As with any other role, you need to think about what is missing from your team, or what type of person would complement it. Your new auditor needs to have a similar frame of mind and therefore able to understand your business’s requirements. You also need to verify their skillset and be confident that they will be an asset to the team. Here are a few checks to run through when hiring an internal auditor:

• Check their credentials and make sure they have previous auditing experience
• Make sure they have a thorough understanding of whatever business you’re in. In particular, they must be confident and knowledgeable of any recent technological advancements so that they can identify out-of-date machinery
• Find a candidate that is solution driven. Crunching the data is all well and good, but if they can’t come up with actionable solutions then they won’t be any use to the business
• After you’ve found an ideal candidate on paper, you need to ask them the right interview question. Make them prove that they can think on the spot and solve the most unexpected of problems.

Once you’ve found the perfect person for the job, they can begin the process and start improving your business:

The auditing process: planning

Before you appoint an auditor, you need to create an auditing plan. This plan will outline which elements of your business need auditing — every business will have different areas of focus.

Departments that may need auditing include:

►Purchasing

• Purchase invoice process
• Purchase order process

►Sales

• Sales invoice process
• Sales order process
• Sales quote process

►IT and Security

►Human Resources

►Accounting

• Payroll process
• Expenses process

►Manufacturing

• Preparation of Item A
• Production of Item A
• Finish/Quality Control process

►Shipping

• Stock process
• Shipping process

It is essential that you gather this information before setting out. You also need to decide how often each department will need auditing before scheduling your audits in. After you’ve got all of this sorted, the auditor can begin their work.

See also: 3 workplace audits beat the back to work blues

Step one: observation

To begin their auditing process, an internal auditor will first monitor some employees as they go about their usual roles. If possible, the observation process should be conducted in the most natural way. For example, the auditor will monitor a task that would have been completed that day, whether under observation or not.

During this observation, the internal auditor will interview the employee and carefully oversee how they tackle the task in hand. Depending on how the employee answers the questions, the auditor will asses how competently the task is being carried out. They will look out for any signs of outdated equipment or procedures and make notes of any concerns raised by the employee. The auditor needs to assess whether the member of staff is following correct protocol and has a thorough understanding of the task in hand and the potential risks that come with it.

Step two: report

Once the observation process has been completed, a report needs to be written up. This report will highlight any crucial findings and raise any concerns the internal auditor has about any given member of staff.

Reports will vary depending on your sector and the level of detail you have asked for. Essentially, it is a summary of any important findings, along with recommendations regarding how you could improve the efficiency of any given task. In the case of non-compliant findings, the auditor will need to recommend specific changes. Often, this will come in the form of a second “non-compliance report”.

See an example below:

Example of a non-compliance report

Step three: action

A plan of action is the natural next step. After the internal audit has been evaluated, actionable tasks must be put in place. During this stage of the process, an internal auditor will work along side the head of the department concerned and help them come up with solutions. The plan should address the finding, the recommended corrective action, who will implement said action, the deadline of the action, and a date to review that everything has been carried out correctly.

See our example below:

Internal audit solutions

If you want to improve the safety, efficiency, and effectiveness of your company, then employing an internal auditor is an essential, not just a box to tick.

As a business director, you can’t monitor everything at once. Problems might slip through the cracks and, when lots of these issues combine, your business could be damaged, or staff could be disgruntled.

An audit will bring a fresh pair of eyes to your company and allow you to feel confident about how your business is being conducted. What’s more, thanks to regular audits, you will be able to see how your business progresses and improves over time.

Amy Hodgetts is a business writer who specialises in industry, manufacturing, waste management and engineering

Further reading

Suzi Woolfson, PwC Q&A: ‘We’re about increasing stakeholder value’