internal audit for beginners internal outsourced or co sourced

Internal Audit For Beginners: Internal, Outsourced, Or Co-Sourced?

An effective internal audit tactic saves a company or any business from going through liabilities. Most often, these liabilities happen due to a lack of compliance with federal policies.

Good that there are experts you can get in touch with and help you perform better auditing. 

An audit of roles: What Does Internal Audit Exactly Do

An internal audit department ensures the security of information vital to a company. The most common of these are financial data and information that goes in and out of business. Auditing is a valuable tool that helps mangers evaluate the overall company performance and help them manage some risks.

All types of businesses must have a team or set of individuals they can outsource to audit the company’s activities. An internal audit assists in identifying areas for improvement while providing suggestions to achieve its objectives.

An audit is an excellent opportunity for company boards and management to reflect and ask the following questions:

• Are we making headway toward our compliance objectives?
• Is risk effectively managed? Are policies and procedures followed correctly?
• Could they be made better?

These are just a few questions an internal audit can answer.

Difference Between An Internal And External Audit

Internal and external audits are very different in terms of objectives and procedures. 

But, the main difference is that internal audits are not regulated. So you can use them more freely. You can use them to highlight information that you can use to help the company improve the following:

• information security
• risk management
• compliance

These are some of the distinctions that show how internal auditing can be more effective than external auditing.

Internal Audits:

• An internal audit aims to educate management and employees about enhancing business operations and efficiency.
• An auditor is a trusted consultant advising upper management on managing the company’s risks and goals best.
• An auditor reports to those within the business or organization.

External Audits:

• An external audit aims to give financial reports the reliability and credibility it needs for external stakeholders.
• External auditors have no obligation to the organization. They only need to determine the accuracy of annual financial statements.
• An external auditor will report to shareholders outside an organization’s governing structure.

What Happens During An Internal Audit?

In general, the internal audit process goes as follows:

Gather Information

The auditor will do the following:

• observe
• take notes
• review documents
• interview employees

These are steps needed to understand better how the organization operates.

Security Assessment

Auditors monitor, analyze, and evaluate the organization’s risks and security controls. 

In addition, they will frequently test employees’ knowledge of the company’s objectives, safety standards, and compliance rules at this stage.

Compliance Assessment

The auditor will examine the organization’s adherence to state and federal policies and laws and any international data security and privacy regulations that may apply.

Verification

This is the process by which the auditor checks the information provided and identifies areas that you could improve.

Consultation

The auditor then consults with the organization to provide remediation recommendations and implementation steps.

Review

The audit does not end with the audit report because the auditor will need to follow up with the organization to ensure its progress and continuous improvement.

In addition, depending on the extent of the audit and the size of the company, the time required could last several weeks. 

Finally, an audit includes a consultation with the director or board to discuss how you can best implement their suggestions for improvement.

If you are new to sourcing, knowing what sourcing arrangements are available, aside from internal audit co-sourcing, may help you rule out other options.

It is critical to consider what you require and what type of arrangement might work for your organization:

3 Types Of Internal Audit

There Are Specific Tasks Performed In An Internal Audit. There Are Three:

Internal Audit

This is usually a team or group of individuals assigned by the company.

Outsourced

An internal audit service provider or an independent accounting firm performs the audit.

Outsourcing Internal Audit

Outsourcing can help by handling many essential aspects of your upcoming audit. Respected auditing professionals perform these tasks daily, making it easier to perform the necessary audit steps and identify underlying issues to course-correct as soon as possible.

What Are The Benefits?

When you delegate auditing to qualified professionals, such as those at I.S. Partners, they can complete an internal audit in roughly half the time of an in-house team. But, again, this is due to their years of experience, and your audit is their top priority.

• Increased assurance and risk protection.

• Flexibility and scalability in the short and long term, depending on your specific agreement.

• Savings for your company can range between 20 and 40% due to experience, efficiency, and enabling your team members to stay at their desks and complete their regular projects.

• Coordination of various internal audit tasks, such as risk, governance, and compliance, is seamless.

• Access to tools and methodologies, such as advanced data analytics, enables the auditing team to conduct more detailed and sophisticated data analysis and monitoring.

• Easily and quickly identify emerging and hidden risks to help avoid more significant problems in the future.

• Report the findings thoroughly and objectively.

• Transmit findings, knowledge, and capabilities to your business compellingly to aid in refining business strategies to assist you and your team meet strategic goals and objectives.

Co-sourced

Internal audits are co-sourced when a company’s in-house internal audit department collaborates with an externally hired internal audit service provider. 

Co-sourcing allows the internal audit department to collaborate with a reputable firm. 

Many businesses use internal audit co-sourcing to close gaps and cost-effectively meet security and compliance needs.

Co-sourcing Of Internal Audit

Co-sourcing enables you to rely on the competence of a professional auditing firm to the extent that your team is capable of and wishes to participate. 

You could also use a co-sourced auditing team to deal with a particular and complex issue or to complete a highly specialized portion of your audit. In either case, the expertise of your co-sourced auditor frees up your in-house team to focus on the remainder of the audit.

What Are The Benefits?

This method of performing internal audits gives you the best of both worlds because you will be actively involved in the process (for example, by providing institutional knowledge or quickly accessing a paper file) while benefiting from the team’s expertise and streamlined methodologies.

• Bringing in a co-sourced professional auditor saves far more money than hiring a permanent specialist or pulling busy employees away from their daily tasks.

• It gives you access to highly technical information. Even if your organization lacks the budget to hire an auditing professional who can devote time to security regulations, co-sourcing entails technical auditing experts with specific and necessary skills.

• Co-sourced auditing teams assist so that regular staff can participate in internal audits as much as possible without devoting too much time to their daily tasks. Some auditing functions and cycles require more of your auditing team than others; however, hiring temporary expert help can help you complete engagements on time when efficiency is critical.

• Co-sourcing is a flexible solution for scheduling whether your project is for an annual audit, new business activity, or fiscal year-end closing of the books. Audits can sometimes occur during the holiday season when key team members are away from the office. Internal audit co-sourcing is the ideal solution for everyone to honor their well-deserved time off.

• You have easy and consistent access to an objective viewpoint throughout your internal audit and after receiving results. An objective co-sourced auditor can help your team understand what changes you need to make based on the audit results to improve, regardless of how resistant your team is to change.

• Because this auditing involves higher executive levels, an outside professional with risk assessment experience can advise you on how other financial, operational, and industry risks may affect your company.

Co-sourcing’s advantages are similar to outsourcing but on a smaller scale and tailored to your specific requirements. 

Bringing in an internal auditing professional, or a team of auditing professionals, can not only help you shore up a specific project in a given time frame, but these professionals can also leave a lasting impression on your internal audit team. 

Working with a reputable firm that provides an organized and streamlined approach allows your team to adopt specific policies and philosophies to help you stay on track daily for improved ongoing efficiency and easier preparation for future internal audits.

Considerations For Choosing A Co-Sourcing Or Outsourcing Firm

If you’ve never hired a third-party internal auditor before, here are some key concerns and expectations for getting you started:

• Work within the parameters of your company’s professional standards.

• To avoid backtracking, keep institutional knowledge for future projects and assignments.

• Understands the organization’s culture and collaborate with the internal audit team.

• Provides audit committees and senior management with advisory services.

• Covers outlying areas.

• Maintains required memberships and certifications in relevant professional organizations.

• Steps forward to advise the internal auditing team on developing better practices for the internal audit function to streamline processes and improve accuracy.

• Provides specific industry knowledge to in-house audit staff through scheduled training sessions and one-on-one interactions.

• Aids in using internal auditing to provide internal promotions for valuable organizational team members.

• Maintains the hiring organization’s expected knowledge base for each potential engagement.

Final Thoughts

Regular auditing is essential to ensure that your company is always in compliance, running efficiently, and staying one step ahead of the competition.

So if you want your organization to meet the highest standards in all areas, including data compliance and security, start looking into internal audit providers now.

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