Internal Audit Preparation

Thursday, October 23, 2008

Internal audits are a key part of keeping a business healthy by managing risks and rewards. They involve analyzing business practices and offering solutions for smoother processes. While this can be a vital part of running a profitable business, it can also be a burden to prepare for internal auditors. What can the accounts payable (AP) team do to prepare?

First, get an idea of the desired outcome of the audit (i.e. better business practices, like an online travel service implementation, or shorter purchase to pay cycles). Determine what will be required from your AP or accounting department and how much time will be needed for audit preparation. Most audits take 8 to 12 weeks (http://en.wikipedia.org/wiki/Internal_audit). Once you have a general idea of the time frame and project, set out a plan to go through the following steps:

Have all necessary documents on hand. If your company uses a Quality Management System (QMS), include information stored there as well. Not all audits are the same, so ask your auditor for guidance on which documents would be helpful. Also, having general records available and organized will help immensely. The more time you spend organizing the data beforehand, the less time you have to spend explaining and searching when the auditors arrive.

Consider potential questions. Take a look at the cash flow process so that you can answer any relevant questions. Note anywhere you have performed a self analysis or evaluation. Much of this may be in the QMS. Once you review your own process steps and requirements, you will be better able to answer questions quickly and correctly.

Finally, prepare to be unavailable for work during some of the auditing process, since time will need to be spent with the auditor. To minimize distractions, treat this time as though you were out of the office. This will make the audit process more efficient and will take less of your time than repeated interruptions.

Labels: Accounting, Cash Flow, Finance Tips, IRS