To be prepared for an audit, a company requires that its professionals are willing and available to assist the internal auditors. After all, experts will ask about responsibilities and transactions.
In this scenario, systems and people must be mature to act with transparency. This is very important in the process, especially when talking about facts that directly impact the financial statements. In this article, we will address two important points:
Organization: being prepared requires much more from the company than providing a room and separating documents. The company must internalize this as a natural, part of everyday life throughout the year;
Culture of Internal Controls: With the development of a culture of controls, the organization will have a better understanding of the impact of the audit on each department and activity.
These controls must be aligned across different departments. In addition, such supervisory mechanisms need to be known to all professionals. More than being familiar with internal controls, it is essential to practice and review them daily. That is, there must be financial, administrative, productive, sales control, etc.
INTERNAL CONTROLS CULTURE
A good environment of “Internal Controls” demands that each department has its responsibilities and processes well defined.
However, for this, people must be trained to perform their tasks to mitigate risks as there is still the benefit of strengthening yourself for unavoidable adverse situations. In other words, it is easier to manage the crisis and overcome the challenges.
A culture of “Internal Controls” starts with administrators. In this context, management has to set the tone and bring to its organization an ethical and “Internal Controls” culture.
IMPLEMENTATION IN PRACTICE
Internal auditing improves the organization’s processes and, at the same time, increases its credibility with customers, suppliers, competitors, and society as a whole.
After all, the internal audit is a positive sign that the company values the transparency of its operations. However, we say that auditing is also a way of analyzing the quality of processes and identifying risks. Thus, from this assessment, it is possible to create ways to mitigate threats to the business.
That said, it is essential to form an Internal Audit Department to interact directly with senior management, and, this department will move through all hierarchical levels of the company. After all, it is necessary to test the controls daily.
In addition, internal auditors must have freedom and independence. These requirements are mandatory for maintaining an ethical environment. The independence of consultants is one of the principles of internal auditing.
Thus, even if not all companies are required to go through these investigations, if the majority chose to do so, it would contribute to the “Culture of Internal Controls” and “Ethics” gaining strength.
Therefore, companies would always be within the best practices and prepared for procedures of this type.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
CA Aman Aggarwal
AKGVG & Associates