All companies, from small businesses to big conglomerates, want their business to grow. Business will grow as a consequence of more profit being made and reinvested but what prevents this from occurring? There are many answers to this question, including bad management and over-spending, however chief amongst these is the lack of internal controls which severely reduces or even eliminates the potential of the company to grow.
Internal audit has often been called the “catalyst for growth” through its three-pronged approach of Risk Management, Governance and Internal Controls. This type of audit strengthens and solidifies a company’s potential to overcome fraud and operational leakages.
Internal audit strengthens a company’s bottom line, ensures the completeness of revenue recognition and prevents the potential loss of millions of dollars in assets.
Regular internal audit checks allow the company to run more efficiently, ensuring resources aren’t lost, and that there are minimal errors and losses and less unpleasant surprises.
Internal controls serve as the first line of defense in fraud and violations of laws, regulations and provisions of contracts and agreements, according to withum.com.
This is why Internal Audits are different from External Audits.
An external auditor does not look for fraud throughout the audit process. An external auditor works on a sample basis to test the financial systems within the company and provides their experienced opinion on the truthfulness of the financial statements.
An external audit, which is a statutory requirement, usually occurs once per year and well after the year has been completed. This process focuses on finance and the key risks associated with the organization’s financial business and the timeline of undertaking an external audit does not lend itself to being a proactive solution for a company’s growth and hence cannot be used as a vehicle for growth.
We have included a graphic below which simplifies the main differences between the two (2) types of audits, hopefully to assure you of which type of audit could be used as a catalyst for growth in your business:
