As much as you would like to be in charge of most departments in your organization, the simple truth is that it is not easy. The best way to seize control of these departments is by having some form of vetting done from time to time. The accounting department is one of the departments that should be given a high priority as it deals with money, which is vital in the running of any business. Hence you should consider having an internal audit function in your organization that will look at the organization's situation, and report back to you about any significant findings. The following is how an internal audit may help keep your business in check:
Fraud Prevention
Fraud is the use of deception, dishonesty, or false interpretation with an aim of injuring other people's interest or gaining material advantage. Examples of fraudulent activities in a business include investment fraud, accounting theft, embezzlement, and collusion between employees. Fraudulent activities tend to increase when the economy is facing a downturn due to factors like stagnation of compensation and personal financial pressures.
When dealing with cases of fraud, a financial auditor is responsible for carrying out a fraud risk assessment. It is a structured method that identifies and analyzes risks of fraud in a business or an organization. It also determines if the controls are functioning as intended.
An audit system can help you improve the internal controls of your business, an action that may reduce fraudulent activities. This is achieved by focusing on the basics of internal control like proper documentation, separation of duties, adequate supervisions, and evaluation of transaction accuracy. On top of identifying existing fraudulent activities in a business, a risk assessment also looks at the different ways that fraud can occur against your business.
Monitoring Business Operations
The audit unit responsible for checking the operations of a business is known as operational audit. It looks at the degree of efficiency and effectiveness of your business activities. In other words, an operational audit function evaluates specific operations within your business and assesses how these operations have made an impact to the growth of your business. Examples of these operations are logistics, data processing and purchasing and receiving of stock. However, the operations vary from business to business depending on what these businesses deal with.
Adding an audit function in your business model may seem like an additional cost. But when you consider the money that an audit function can prevent from being lost, it may be worth it in the end.
Share27 January 2016
Hi, everyone. Nancy here. I am currently studying for my degree in mathematics. As part of the “maths in the workplace” component of my degree, I am doing an internship with an auditing firm. Of course, getting to apply maths in a practical setting has been an absolute joy, but there have been a number of frustrations too. It has been a real eye-opener to see how many businesses have a haphazard approach to accounting and book-keeping. One of the jobs the auditing firm undertakes is to recommend improved accounting practices. A number of businesses which have hired professional accountants since the last audit have definitely thrived! I hope this blog captures the beauty of applying mathematical principles to business and using tried and true accounting methods. I trust my entries add up properly to give you an equal share of information and inspiration. Thank you.