Internal audit is the assessment of the internal processes in order to enhance organizational strategy. Fair representation and material verification of information and financial reports has become increasingly important in today’s time. It does not only bring huge legal liability/cost, but companies try to avoid as much as possible potential legal scrutiny.
Third-Party Auditors play the role of an invisible support system in the internal audit of organization’s risk management capabilities. They may be even asked to audit financial statements of previous years to verify the balances and findings of previous auditors.
Hence, an internal audit may be subjected to even further investigation in order to mitigate the organization’s risk vulnerability. Each financial year brings new challenges in the audit landscape, while some priorities remain constant like building a relationship with an extremely competent team that value confidentiality and effectiveness. Having a good approach towards avoiding doesn’t only help in protecting assets and minimize potential frauds – it also puts in place integrity and reliability.
The 5 major priorities for third-party internal audit
- Privacy and Data Security: A full-proof system of accounting security is required to save oneself from huge revenue loss, hacking and data theft. Technological advancement is happening at a scary rate which puts accounting systems in a vulnerable position. There should be an internal control protocol for minimizing access to accounting data in terms of viewing, alternation and sharing. Additionally, it is important to track the activities within the system. An outsourced audit can offer a new perspective on the adaptation of technologies increasing the risk of data leakage/security breaches. Additionally, auditors can check the level of security provided by the existing systems. These teams are well-versed in local compliances, and keep track of the changing data and privacy norms. This might be difficult for all companies, especially the small/medium companies that don’t have the resources to build an internal team.
- Regulatory Landscape: New regulations put additional pressure on the top management and add complexity to the structure of the organization. Without being up-to-date on the changing regulatory requirements, organizations can fall prey to litigations and ethical risks. A lack of knowledge of the new regulatory norms can increase the cost of running businesses, as businesses will be spending more to achieve compliance. Outsourcing local audits helps avoiding regulatory risk by keeping updated knowledge on the changing business requirements and disclosures. The nature of financial disclosures is rapidly changing, the account books need to be audited to be able to furnish required disclosures. Hence, regulation becomes crucial.
- Corporate & Organizational Resilience: the world is met with new challenges every day, especially during the pandemic and possible political turbulence. Businesses need to weigh their resilience to future through carrying out a review of their coping revenue and bad debts. This helps in weighing out where one stands in times of crisis. Further, local audit can ensure competency and performance through quarterly returns and goal achievements. ESR/AML audits can help companies save businesses from falling prey to financial penalties. This can help in strengthening resilience to unprecedented troubles.
- Investment Allocation – Business continuity depends on how investments are done, and how it is allocated across functions and levels. To ensure investment flows in through attractive investors, companies need to keep their disclosures clean. An audit helps in not only maintaining a certain reputation in the business market but also helps in avoiding operational disruption. Through a proper audit in place for asset allocation, it balances the risk and reward for organization. Additionally helps in building organizational resilience.
- Risk Assessment & Management – Traditional ways of conducting risk assessment have become old news since organizations are becoming complex. Audit methodologies like annual planning, manual budgeting and resource planning are terms of the past now. Bringing agility in risk management considers the potential of technology to achieve dynamic risk assessment. It enables greater coverage, less error and cost-efficiency. An external audit team can ensure the enhancement of first- and second-line risk to introduce more data driven processes. These data-driven processes and systems should also be introduced in the security systems to ensure greater protection.
Summarizing our observations and priorities on risk management, it is an integral part of management of the organization. Companies based in UAE will benefit greatly with independent third-party auditing. It dictates the continuity and business performance for the long run. Especially since the future will see more reliance towards compliances, regulatory reforms and strengthening audit. Successful audit teams are those which are detail oriented, high-performing and align time with the organization’s key objectives. Accounting audit doesn’t only examine the company’s financial performance through statements and disclosures, it also helps in company’s organization. Every organization should make a resolution towards building a strong connections with external audit teams to ensure durability.