Internal audits are an important part of business operations. The Institute of Internal Auditors defines them as an evaluation function that examines core activities within a business organization. Administration audit checklists cover high-risk business elements that are critical to strategic objectives. After an examination of your particular business operations, the best practice is to frame internal audit checklist questions so that affirmative answers indicate the existence of no problems.
Internal Management Audits
Checklists for internal management audits should evaluate matters such as:
- basic planning
Basic planning includes the presence of a clear mission statement; annual budget; pricing policy; and written business, marketing and sales plans. Personnel audit controls review whether employer's expectations are clearly communicated, such as through an employee handbook and individual job descriptions.
Business Operations Audit
Business production matters are addressed in an operations audit. Supplier relationships can be reviewed to evaluate inventory controls, as well as delivery and payment systems. Inspect inventory against benchmark quality-control standards. Check for contingency plans that identify alternative sources for necessary materials.
Ensure compliance with regulatory standards, such as the Occupational Safety and Health Administration, or OSHA. This can be reviewed against documented safety records and accident reports.
Internal Financial Audits
Critical issues that can be reviewed in an internal financial audit include general bookkeeping and accounting practices. Review current income and expense statements for accuracy. Evaluate the status of repayment history of business loans. Review the company's credit and collection policies.
Determine whether bank statements reconcile and that cash flow is adequate based on project needs. Payment authorizations should be reviewed to avoid fraud. Review systems for deposits for federal withholding and Social Security taxes. Annual financial audits should also ensure that tax returns are filed in a timely manner.
Public companies may also have additional financial reporting requirements that should be reviewed, such as compliance with federal regulations such as the Sarbanes-Oxley Act. Legal counsel may be required to review all legal compliance requirements.
Business Systems Audits
Identify all of the core business systems in place across your organization, as well as how they're interconnected, when developing internal systems audits. Computer and automated systems that measure and monitor activities should be checked. Review system maintenance logs to determine whether more frequent checks are routinely documented.
Operational manuals should exist for all equipment. Check with supervisors to ensure that manuals answer all questions or whether further training or technological upgrades are required.
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