Using Internal Audits to Your Advantage
As soon as the word “audit” comes up, most people think IRS and start to sweat. Internal audits, though, are good things that can help you manage your company more efficiently and profitably. These are really just systematic ways you can verify that your internal controls are working.
Although a lot of internal audit procedures are performed on a regular schedule, such as bank statement reconciliations, others are best done at unexpected times. For example, performing an impromptu inventory count can tell you more than a count you've scheduled months in advance.
Big companies often have dedicated internal audit staff. Small companies usually don't need full-time staff in this area but can still benefit from the types of procedures they would use. Basically, an internal audit involves independent verification to make sure things are really the way they seem. The verification comes by comparing documents to make sure they mesh; for example, making sure a cash register tape matches the corresponding cash deposit slip. The independent factor just means that someone not directly involved with the task in question (this can be you) makes that comparison. For example, you wouldn't have the cash register clerk do that verification himself and report the results to you.