We can broadly classify audits as either internal or external. This article takes a closer look at internal audits. What do we mean exactly? What do they involve? And what are the benefits for your organization?
Read on to get answers to all these questions.
What is an internal audit?
Internal audits are inspections or assessments conducted within an organization to determine how well or reliably its operational processes and procedures are working.
In contrast to an external audit (conducted by impartial, independent auditors from outside your organization), internal audits are performed by someone employed within your own organization.
They focus on one or more processes, and it’s vital that you approach these audits in a systematic and disciplined fashion.
What are the benefits?
Firstly, internal audits give you an opportunity to improve your operational processes. Additional quality control inspections provide you with a fresh perspective on how to make improvements, either operationally or strategically. Benefits could include smoother processes, higher productivity, or lower costs.
Internal audits also generate greater transparency and help reduce the likelihood of serious situations arising, which in turn boost your company’s image and reputation. Stakeholders will trust your organization more when they see you’re constantly inspecting and improving your operational processes and quality standards.
Periodic internal audits also help create a structured verification mechanism, as they keep you focused on your compliance with current legislation and regulations, operational efficiency, and cost effectiveness.
Types of internal audit
Not all internal audits are the same. There are several types of internal audit each of which differ in terms of their objective and methodology. Let’s take a closer look at four types of internal audit that we encounter in practice.
Compliance audits address whether an organization complies with certain legislation and regulations, for example privacy or QHSE rules and quality standards.
Concrete examples include CERT or GDPR checks.
Process audits address operational processes. Is everything running smoothly or is something in need of improvement? How can we make our processes run faster, more efficiently, or more cost-effectively? Process audits compare paper-based theory with practical reality.
Concrete examples include periodic machinery inspections and operator performance assessments.
Theme audits focus on a specific issue within your organization. Often, issues are strategic in nature, for example customer satisfaction, privacy management, or safe working practices. Theme audits address how your organization applies the theory underlying a given theme in its daily operations.
A concrete example of a theme audit is an evaluation of your communications, retention, and returns policies as part of overall customer satisfaction.
Objective audits address a certain process to determine whether specific operating procedures are actually helping you achieve predetermined targets or goals. They analyze and test each step of a process to determine efficiency and performance. Have you actually implemented all the theoretical steps in practice? Are your repeating a process or step unnecessarily, leading to longer turnaround times or higher costs?
A concrete example of an objective audit is an investigation into reduced energy consumption and material usage within a production process as part of your organization’s CSR objectives.
Planning an audit step by step
Although every internal audit is different, you’ll discover most follow a number of pre-determined steps. Let’s take a closer look at the steps common to most internal audits, the 5 Ps: plan, prepare, perform, publish, pursue.
Solid planning is vital to getting the most out of your internal audits. When, what, and how will we conduct audits over time? And which parts of our organization will we be auditing? What’s more, planning and spreading audits over several years will give you more room and flexibility to conduct higher-quality and more meaningful audits.
After planning comes preparation. This involves structuring the day’s tasks. Which units, departments, and/or quality systems will you inspect and when? Another important consideration involves examining the results of your previous audits.
Once you’ve finished your preparations, it’s time to perform the audit. This involves investigating whether your organization meets specific standards or requirements for certification or other purposes. Auditors look for evidence and gather information from a range of sources, for example documentation, registration forms, personal observations, and co-worker interviews.
Once they’ve compiled a dossier, they start their inspection, assessment, and evaluation. Does the information tally with what co-workers are telling them? Does the information pinpoint anything that’s not going so well within their company?
Once auditors have completed their audit, they publish all the information and their findings in a report. This report details the issues discussed and focuses on important areas for attention or improvement. They then discuss the report’s conclusions with key managers within your organization.
The final phase involves pursuing the measures recommended by the auditors. Have we implemented the measures, and are they having the effects we envisaged? You can do this in writing or as part of a repeat audit.
Make it visual!
To get the most out of an internal audit, it’s critical that you make the key insights and results visual. A great way to do this is to use AG5’s skills management software.
All the information auditors need (skills, tasks, certificates) is available from a single centralized system. You no longer have to patch together bits and pieces of information in a panic. Pass your audits with flying colors!