Many companies make internal auditing a regular part of doing business. Some maintain a full-time internal auditing department to keep up with increased accounting service reporting requirements. It's important for any business to consider conducting regular internal audits, especially in the following situations:
Companies with No Internal Audit History
Often small companies or companies that experienced quick growth after launch have never conducted an internal audit. Any organization with multiple employees probably has unknowns hiding in its balance sheets and other records that can’t be discovered without a thorough, objective investigation.
An internal audit qualifies as necessary housekeeping, just as vital as inventory or bookkeeping. Even if the audit doesn’t identify any areas of concern, it reassures leadership that things are running well, and it provides a verified baseline for posterity.
Companies Considering Report-Triggering Activity
A company that’s considering seeking funding, selling shares, or any other step that will likely trigger a legal requirement to report on finances should seek an internal audit to avoid unwanted surprises. Unexpected findings of serious concern or even malfeasance during an on-the-record exterior audit can do irreversible damage to investor and government relationships.
An internal audit allows a company to privately identify and address any problem areas and to then take necessary steps to resolve any issues without the spotlight of outside scrutiny, which serves to keep its reputation intact.
Companies with Projection or Performance Anomalies
Many companies that started out as one-person operations develop an inertial resistance to empiricizing their projections for future performance. While the company may take pride in the founder’s history of making “gut calls” that led to success, the lack of an empirical analysis can make it impossible to troubleshoot problems when they do occur.
A small organization may have a tendency to view everything within simplistic “supply and demand” or “profit and cost” terms, even when the real culprit is more complicated. An internal audit allows a company to examine the full extent of its finances.
Most crucially, a full internal audit examines a company’s processes, controls, and entire means of conducting business. This deeper investigation goes beyond the financials, allowing ownership to identify problems that aren’t evident on the balance sheets alone and can’t be completed by a daily bookkeeping service.