Common Risks and Opportunities Audit Committees Should Consider
An internal audit can do much more than just prepare your organization for an external audit, acquisition, or public offering. An intentional approach can yield strategic benefits by providing useful insights, identifying competitive advantages, and protecting your company’s assets.
But investing resources in your internal audit function can be a tough sell to your board’s audit committee. They need to know exactly how this investment will pay off in terms of reducing risk and increasing opportunities.
These key risks and opportunities can help your audit committee see the power and potential of investing in a robust internal audit function.
Risk: Internal Controls
One of the most common use cases for an internal audit is ensuring that internal controls are working effectively. This offers boards a baseline idea of your company’s financial health before you begin an external audit. It will also help identify areas of improvement that could reduce compliance risk.
Opportunity: Increased Efficiency
Internal audits can help boards evaluate the overall effectiveness of systems and processes to identify opportunities for improvement. With regular internal audits, you can tweak processes and make larger adjustments to maximize profitability. This type of oversight can be particularly useful given today’s talent shortage, where a lack of expertise and experience with certain functions can lead to errors and inefficiencies.
Through internal audits, companies can monitor employees for suspicious or risky behavior, which can help to identify and prevent potential missteps or fraud. Performing penetration testing and looking for proper credentialing and system access are also important.
Opportunity: Competitive Advantage
Understanding how your company stacks up against competitors and industry benchmarks can support strategic and tactical decision-making. Internal audits can ensure that your business stays ahead of the curve by providing information about emerging trends and threats. Boards can use the knowledge gained to avoid unexpected risk and capture new opportunities.
Risk: Strategic Threats
An internal audit function is a critical support system for your enterprise risk management program. Audits can offer visibility into whether your board has identified and managed risks related to strategic goals, helping you to stay on track. Regular auditing may also reveal new or emerging risks that were previously unidentified.
Opportunity: Objective Insight
The internal audit function should serve as your organization’s trusted advisor. Internal auditors are in a great position to connect the dots within the bigger picture as well as to notice warning signs and gaps that others may have missed. With the right level of independence and objectivity, they can serve as a clear-eyed catalyst for positive change.
Taking the Next Step with Internal Audit
When properly developed, an internal audit function offers multiple benefits to an organization beyond simple compliance. Regular audits can reduce strategic threats and create opportunities by increasing efficiency and competitive advantage. With innovations such as robotic process automation, your organization can experience better workflow, leverage deep and diverse skills, and increase risk management effectiveness.
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