Brown Auditing Services understands the importance of internal control in auditing. Our NSW audit and assurance team is happy to help you navigate the different types of controls in audit processes, and to strengthen your audit strategy as much as possible. Here, we take a closer look at the role of internal controls in ensuring businesses are always ready for audits.

The Audit-Readiness Challenge

Audits are independent examinations of an organisation’s financial information. Whether the tax office, board of directors, or a third party is asking for an audit, it’s good business practice to be prepared in advance. Sometimes this is easier said than done, as there are challenges in preparing for an audit, such as human resources, valuating assets and maintaining detailed records during a change of management or ownership.

Given these challenges, the importance of internal control in auditing remains highly relevant for modern businesses. With smart control systems in place, organisations are well-positioned to achieve objectives and maintain accurate records for an easier audit season.

Understanding Internal Controls in Audits

What role do internal controls play in audits? Internal controls are different accounting and auditing processes used to protect the integrity of financial reporting and maintain compliance with industry regulations. Internal controls may be processes, records, systems and/ or activities used to prevent fraud and ensure compliance.

Internal controls examples include segregation of duties, physical controls, staff training, policies, procedures, transaction reviews, activity monitoring and information processing software. Keep these elements in mind when looking at an internal control over financial reporting checklist customised to your organisation.

Key Components of Internal Controls

All organisations, from small businesses to large corporations, can benefit from internal controls that maintain compliance before, during and after an audit. The most effective internal controls for straightforward auditing include the following components:

  • Control Environment: the operating/ management style and division of authority
  • Risk Assessment: direct ways of identifying and managing internal risks, such as meetings or reviews
  • Control Activities: policies and processes that manage risk across operations, including approvals, authorisations and security limits
  • Information and Communication: records of important information, especially financial reporting and staff correspondence
  • Monitoring: regular internal audits and independent expert exams to review the internal control landscape

Benefits of Internal Controls for Audit Readiness

Audit and assurance experts highly recommend an internal control over financial reporting checklist to help organisations stay ready for audits. By implementing effective internal controls based on industry case studies, you can put your business in prime position for a smooth and successful audit. The more organised and up to date your records are, the easier it will be for auditors to match everything up. Remember that internal controls set the guidelines for financial compliance and performance; by using these systems you can ensure your organisation is well prepared for an audit.

Discuss Your Internal Controls & Audit Strategy with Us

Now that you’ve seen internal controls examples and learned about types of controls in audit procedures, you can use these tips and best practices for staying audit ready. If you have any questions or need guidance on leveraging technology for internal controls, contact the audit and assurance team at Brown Auditing Services in NSW.