Once a business has an established management system in place, it is essential to undertake regular internal auditing in order to benefit from ongoing improvements in efficiency, effectiveness and control.
What is an Internal Audit?
An internal audit is intended to evaluate the efficiency and effectiveness of an organisations Management System the businesses overall performance. These internal audits verify compliance with the ISO standards and how the processes are implemented and maintained and are a key building block to an effective Management System.
Management system audits should be:
– Planned and scheduled at regular intervals
– Completed by an impartial auditor – a requirement of every ISO standard
Failure to complete internal audits can result in:
– Internal issues from failing to verify procedures
– Unwanted external non-conformances
The vital information gathered from these internal audits allows organisations to continually improve their business, processes and operations as well as maintaining an audit ready status in the event of an external regulatory inspection.
A well developed, effective audit program can provide key information that will identify problematic areas and help businesses to be proactive and resolve the problems before they lead to compliance issues. Having this internal awareness allows organisations to be aware of any potential areas of weakness which means they are able to quickly and effectively put in place corrective and preventative measures to ensure the issue is resolved and that it won’t happen again in future.
Thorough and organised measures help to demonstrate to the regulatory inspector that the company is in control and working to continuously improve its operations in line with the ISO standards.
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ISO Internal System Audits
Internal auditing is an activity which many companies must complete to comply with ISO requirements. An internal audit is a way of collating and producing independent information regarding the internal control processes, governance and risk management of the company. There are a number of benefits to hiring competent and capable internal auditors.
Does My Business Need an Internal Audit?
An internal audit is not just about satisfying a regulatory quotient that adds no value to your business. It is widely recognised throughout different industries as a way of helping companies achieve their goals.
It won’t just help minimise risk either – instead it can:
- Provide incisive insights that will palpably improve performance.
- Identify ways and opportunities that can help develop and improve the way the operation is run.
- Ensure compliance to the requirements of internal, international and industry standards as well as regulations, and customer requirements.
- Help to determine the effectiveness of the implemented systems ability to meet specific objectives such as financial, quality and environmental.
- Provide feedback to Top Management.
Forbes conducted a survey in 2010 that verified the importance of internal audits, with 94% of respondents agreeing that the function contributed positively to the development of their business.
How Often Is An Internal Audit Required?
You may wonder if there are any regulations that dictate how frequently these audits should be performed. The fact is, that it is up to the company in question – there are no binding regulations regarding this practice.
You should consider the type of work your company does as this can determine how often you will require an internal audit. Companies with high levels of risk in their operational practices, such as construction companies or waste disposal companies should have audits completed frequently. For most medium and large companies, the rule of thumb is to have an audit done every few months.
Who Has Access to The Audit Reports?
Once your internal audit is completed, the reports need to be available to:
- The management and governing board of the company who can address any problems the audit uncovers.
- External auditors who may ask for these reports to verify your internal processes once an annual external audit is completed.
History Of ISO Internal Audits
At JR Consultants our independent internal auditors are responsible for the key functions within a business, providing an independent assessment of a company’s operations and the effectiveness of its internal control structure.
We offer an internal audit service where we manage the system on your behalf. We ensure that internal audits are completed regularly, management reviews are held at least annually, and any non-conformances are rectified. We can also act as your management representative during external assessment processes.
What Does an Internal Auditor Do?
Our internal audit services provide a systematic and disciplined approach to evaluate and provide the following services:
- Assess the management of risk
- Assist management in the improvement of internal controls
- Evaluate controls and advise managers at all levels
- Evaluate risks
What Are the Benefits of Having an Independent Internal Auditor?
- Naturally impartial – will have an unbiased view to the audit process
- Experienced – to a much greater degree than internal staff, so can give wide ranging advice
- Knowledge – especially important in Health and Safety and environmental management systems
- Organised – audits are planned and scheduled to be completed regularly and on time
- A “fresh look” – much more likely to spot any errors than an internal auditor
- Minimal distraction because employees have little involvement in managing or running the process
What Does an Internal Auditor Do?
JR Consultants have a number of skilled and experienced auditors who can impartially audit your management system and are independent to the process, as required by any standard.
Audits can either be based on your own existing audit timetable (providing it is adequate and covers all requirements) or we can set up and run a new audit timetable for you.
We will then complete internal audits according to the timetable, and schedule visits to ensure that all elements of the system are covered prior to your external annual assessment, which we will also attend if required.
Where required, we will raise any non-conformances, advising where necessary on corrective actions, and ensure all actions are completed.
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Internal Audit Requirements
Here is a breakdown of what is required from an organisation in the run up to, during and following an internal audit.
Management of the Internal Audit Activity
Your business will need to be able to demonstrate that:
- Those involved in the enactment of the internal audit are fully compliant with its code of ethics and standards.
- In every possible sense, the internal audit is conducted strictly in line with the standards and its implied definitions.
- Its achievements reflect the aims and responsibilities outlined in the internal audits charter.
Overall responsibility for overseeing the above must be deferred to the company/organisation’s Chief Executive or someone occupying an equivalent position of authority.
When you arrange an internal audit you may wonder what is required of your business during the process. Is there anything you need to do? What should you be providing your auditor with?
There are a few things you should have prepared for your audit, but generally the auditor will ask for additional information when they need it.
What You Should Have Ready
There are a number of things you need to have to hand for your internal auditor. It is best to have these readily available, as it will save time for you and your auditor:
Your current audit timetable
Any documented processes, procedures or manuals should be provided. These should outline your system and how it interacts with the processes implemented
The reports left by your previous auditors. When your last internal audit was done the auditors will have given you a report on their findings and what has to be done. Your new auditor will need this to see if any of these issues have been looked at.
What You May Be Asked For
During the internal audit the auditor may request certain information, or ask for certain interactions with your staff.
The information will vary depending on what is being looked at during the audit process, samples of transactions and examples will be requested to verify compliance and conformance to procedures. They will also require meetings with various staff members including higher level staff members as they try and assess what the relationship is between the average worker and management.
The Difference Between External and Internal Audits
There are a number of ways that an internal and external audit will differ. To better understand these differences, it’s useful to know what each audit consists of.
Internal Vs External Audits
An internal audit is a critical review of all aspects of the business. The auditor will look at all the processes in the business that occurs during the daily running of the operation.
In contrast, an external audit is an outside organisation looking into the business. The external auditor will usually compare to a specific set of requirements or guidelines.
There are a number of differences, and it is important to know what the internal auditor does differently from the external auditor.
The appointment of the auditor for internal and external audits is the same – auditors are chosen and appointed by the management of the business.
- Internal audits are not required by law, but are part of good business practice and required by the standard. External audits are required annually to maintain your accreditation.
- Internal auditors should be independent from the process.
- External auditors are independent contractors bought into the business.
- Internal and external auditors will be both paid a fee for the work they do.
- Internal auditors should give management suggestions on what can be done to better the business and identify potential areas of improvement. External auditors are only required to make suggestions to comply with any requirements.
Benefits of Internal Auditing
Internal audits also offer a great chance to communicate quality issues to all personnel across the company. Discussing issues from a quality perspective is valuable training for personnel and sets a tone for a positive, open, quality culture.
Internal audits are not in fact required by law. However, there are a number of benefits that come with taking the plunge. By understanding these benefits, you will be able to see when you need an internal audit and whether they will benefit you.
The Benefits of an Internal Audit
The benefits of an internal audit trickle down through all aspects of your business operation.
- It identifies issues with the management. When an internal audit is performed, one aspect they inspect is the way management works with the staff. If there is a problem with management communication the auditor can demonstrate what the possible resolution may be found
- The audit enables testing of internal control systems. Internal auditors comb through all the processes in your business and tell you how to improve them.
- It helps to identify internal issues and problems. While you may understand that there is a problem, you might not know where the cause of it lies. Internal audits look at the root of the problem and tell you what can be done to remedy the situation.
- It establishes the responsibility of risk control and management. The internal auditor establishes who should be held responsible for certain risks, and the management of these risks.
- It assists people in the understanding of their responsibilities. Often people are unaware of who is responsible for certain processes. Internal auditors will identify who is responsible, and tell other members of staff.
- It improves information flows in the business. Information given to staff may not be of a high enough quality and this can lead to problems. Internal auditors will assess the quality as well as the quantity of the information that makes your business run.
The Need for Internal Auditors
The goal of an internal audit is to help the business to comply with the requirements of the ISO standards whilst successfully managing risk.
The purpose of adhering to the rules laid down in your internal audit management plan is to ensure your business meets its primary objectives.
Before you have an internal audit performed, you should first consider the purpose in your case. You should also be aware of the differences between internal and external audits to understand which is most suited to your needs.
The Value of Internal Audits
Internal auditors look at the aspects of the business which affect its performance and survival. Internal auditors will look past the financial statements and risks to identify the problems in the business as a whole.
Some of the aspects that an internal auditor looks at include:
- The reputation of the organisation.
- The growth of the organisation.
- Change in the organisation.
- The impact the organisation has on the environment.
- Competence of staff and personnel.
- Risks and opportunities.
- Legal Compliance.
Internal auditors are used to help the companies succeed and tackle diverse issues. The auditors will assess the aspects of the organisation, and then tell the managers what the problems are and what they believe the solutions could be.
It can sometimes be hard for organisations to recognise and identify their own issues within the business; less still find the solutions. Internal auditors come into the organisation with a fresh pair of eyes, and tremendous amount of experience in analysing, understanding and troubleshooting.
To find out more about the internal ISO audit services available with JR Consultants, please get in touch with a member of the team today.
What is an annual internal system audit?
Internal system audits are used to assess and evaluate an organisations performance, internal controls or execution of a process against relevant standards, metrics, policies or regulations.
The intention of an internal audit in relation to ISO is to evaluate the effectiveness and efficiency of the company’s management system and overall performance. An internal audit can be a valuable tool to not only improve the business but to demonstrate continued compliance with the requirements of your ISO standard.
By collating and producing relevant information relating to their risk management, governance and internal processes, organisations can benefit from continued and ongoing improvements with their control, effectiveness and efficiency.
What are the benefits of an annual internal system audit?
An ISO audit can be an extremely accurate measurement of how your organisation is performing against the chosen set of ISO standards that you are certified for and carrying out an effective audit can have many benefits such as;
- Providing vital feedback to top management
- Identify risks and opportunities for improvement
- Prevent problems from reoccurring
- Help to boost marketing and sales efforts
- Gives customers and clients reassurance that the high standards are being maintained
- Enhance employee performance
- Provides greater insight into your business
- Helps you to meet statutory and regulatory requirements
- To determine if the implemented system is effective at meeting specific objectives of the ISO standard whether that’s for quality, financial or environmental
What does an internal audit process involve?
An effective internal audit should ideally have the following four phases of activity —Planning, Fieldwork, Reporting, and Follow-up.
During the planning process the internal audit team should;
- Define the scope and objectives
- Review guidance relevant to the audit, such as regulations, laws, company policies, procedures etc
- Determine a timeline and budget for the audit
- Create an audit plan
- Identify the process owners to involve
- Schedule a meeting to commence the audit
This involves the actual act of auditing during which the team will execute the audit plan. This usually includes reviewing relevant documents, interviewing key personnel, testing controls, documenting all work performed, and identifying any exceptions and recommendations.
During the reporting phase the report should be clearly written in order to avoid any misinterpretation. All findings should be accompanied by actionable recommendations that will directly lead to process improvements. The stages of issuing the report involves first reviewing a draft with management to ensure the findings are accurate before the distribution of the final report.
The final stage is important and not to be overlooked. Follow up helps to ensure that the recommendations made in the audit have been properly implemented and have worked to address the findings that were identified.
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