18+ Sample Internal Audit Strategic Plan

What Is an Internal Audit Strategic Plan?

First of all, what is an internal audit? An internal audit serves to analyze a company’s internal controls, which include its accounting and internal control systems. These audits verify that rules and regulations are followed, as well as that financial reporting and data collecting is accurate and timely. An internal audit achieves this purpose by offering insight and suggestions based on data and business process evaluations and assessments. Internal audits have the benefit of providing management and the board of directors with a value-added service in which deficiencies in a process may be identified and remedied prior to external audits.

An internal audit strategic plan is a business document used by the company that sets out the goals of the internal audit and the means by which the internal audit goals are going to be pursued. This document also gives the company the opportunity to identify any potential challenges that may be encountered through the process of internal auditing and the methods on how to overcome said challenges. Finally, this plan will also outline how the process of internal auditing can continue to provide assurance of the audit process while factoring in resource limitations.

What’s Inside an Internal Audit Strategic Plan?

When there’s no strategic plan present for conducting an internal audit, chances are it can still be done but the process is going to be all over the place. These elements will help you ensure that you’ve created an effective strategic plan for your internal audit:

Mission Statement. The mission statement describes the purpose of your company’s or department’s internal audit. The mission statement often includes your internal audit’s target departments inside the organization as well as how the firm intends to achieve success. In other words, an internal audit mission statement outlines what the internal audit intends to accomplish, for whom, and how.Vision Statement. The vision statement is an important aspect of an internal audit strategy plan because it gives a quick overview of what your firm is going to look like in the future once the internal audit is done and the internal audit goals have been met. This section should also express your goal to your staff in the company in a way that motivates them to perform better. Furthermore, it should be evaluated on a regular basis to ensure that it is still in line with how you envision your firm.Goals. An internal audit strategic plan should also include its goals and objectives. You can include both short-term and long-term objectives as long as they are related to your overall company strategy. Typically, one of the goals of an internal audit is to provide insight into an organization’s culture, policies, and procedures. Long-term goals are something you wish to accomplish in the future, and these sorts of objectives usually require more time, planning, or processes. Short-term objectives, on the other hand, bridge the gap between where the firm is today and where it wishes to go in the future. They are typically easier to achieve than long-term goals since they focus on the company’s immediate future.SWOT Analysis. You may use a SWOT analysis to discover and list your company’s strengths, weaknesses, opportunities, and threats. This is critical to the internal audit plan because it helps you to identify potential roadblocks to attaining your company objectives and what you have to do to address them. A SWOT analysis also helps you to identify and define the critical characteristics, events, and enemies of your firm, providing the internal audit process the best chance to examine them.Objectives. When developing this section of the strategic plan, it is critical that each internal audit target be as SMART as applicable. Meaning that it should be Specific, Measurable, Achievable, Realistic, and Time-based. After you’ve established your objectives, it’s a good idea to divide each one down even more into short-term goals that describe the activities and objectives for the near future. Your action plans are your plans for reaching your short-term goals.Action Plans. After identifying the internal audit goals, take into account that each objective must have a strategy outlining how it will be completed. You may also utilize the information collected from your SWOT analysis to develop an effective action plan. The level of information depends on how much leeway you want your management and audit team to have. The greater the level of detail offered the less freedom there for those who adhere to the plan.Management Comments. Management comments are the management reaction to the observation that will be mentioned in the internal audit report. It aids in comprehending their perspective on a given observation as well as their preparations to control the indicated risk. After the auditing process is completed, the audit report is delivered to senior management, along with management’s final comments, to ensure that they have a better knowledge of the audit.Recommendations. These refer to the activities advised by the auditor to mitigate the impact of current auditing observations. As a result, it is the obligation of an auditor to clearly identify the steps required to control the risk and avoid any possible losses. However, it should be noted that the advice must be sensible, and the prospective benefits must outweigh the expense of executing remedial steps.

Common Issues That Can Affect an Audit Process

Listed below are some of the common issues that can heavily impact the internal auditing process of a company:

Scope Creep. What is scope creep? Scope creep occurs when modifications to the project scope are made without any control procedures, such as proposed changes. These changes may jeopardize the achievement of objectives and goals. To avoid scope creep, plan ahead of time for when a problem that may affect scope arises so that the audit team can react swiftly and efficiently. Nothing is more frustrating than enabling the scope to expand and then realizing that you could be one step away from auditing the whole business and its procedures.Lack or Absence of Data Review. When data is required, it is customary to request it from the auditing team. Sit down with the data supplier to learn how the data is created to ensure that it is correct. Always seek information and try to obtain data created straight from the system, as well as the queries or restrictions that were used to produce it. The last thing you need is a breakdown in communication between the data supplier, which might jeopardize your ability to make meaningful suggestions following the audit.Lack of Objectivity and Independence. This is especially challenging in a small organization. Internal auditors respond to a board of directors or an audit committee in bigger organizations, but in smaller businesses, an internal auditor may submit to the very same person or group that they are auditing which can be difficult when trying to keep things objective. The goal is to maintain objectivity, independence, and a forward-thinking attitude. Keep in mind that an internal auditor is attempting to assist and should be let to do so, even if the results are difficult to hear.Lack of Communication. Make sure to include your customer and partners early and regularly during the auditing process. Stepping further than the process of speaking with managers or team leaders is a smart practice. This implies that you must also discuss the auditing process with the personnel, engineers, and so forth. Many times, the people you don’t normally talk to could be following a procedure that is neither recorded nor acknowledged by management.

The Steps of Internal Auditing

Internal audits have the purpose of assessing and improving the effectiveness of a company or a department regarding their governance, how they manage risks, and the overall control of their critical procedures. With that being said, listed and explained below are the steps that are performed during an internal auditing procedure:

  • 1. Planning Process

    This is the first step that is to be performed when a company undergoes an internal audit process. In this step, the internal audit team will define the scope and objectives of the audit, review relevant audit guidance items (such as laws, regulatory requirements, technical standards, company policies and procedures, and so on.), review previous audit results, set a timeline and budget for the audit, create an audit plan to be executed, identify process owners to involve, and schedule a kick-off meeting to begin the audit.

  • 2. Fieldwork Process

    The next step to an internal audit after the planning process has been completed is the fieldwork process. But what does fieldwork mean? The actual process of auditing is known as fieldwork. During this step, the audit team will carry out the audit plan. Conducting interviews on key people to verify an understanding of the system and controls, performing a review of the required paperwork and objects for a sample implementation of the controls, performing a test on the control systems for a sample over a duration of time, recording the work performed, and recognizing exceptions and recommendations are all common parts of the fieldwork process of internal auditing.

  • 3. Reporting Process

    After the fieldwork phase of the internal audit process, this step then follows. What happens here? Well, the internal audit team, as you might expect, will prepare the audit report during the reporting phase. To minimize misinterpretation and to persuade the target demographic to read and comprehend the report, the document generated should be generated simply and concisely. Findings should be backed by concrete recommendations that lead directly to procedural changes. The process of publishing an internal audit report must involve creating the report, reviewing the draft with the administration to confirm the correctness of the findings, and finally issuing and disseminating the final report.

  • 4. Follow-up Process

    After the reporting step of the internal audit phase, the follow-up process will soon follow, which also serves as the last step. Even though this may be the last step of the internal auditing process, this is still important and many internal auditors can still overlook this step. It is essential to follow up to confirm that the suggestions to address the discovered results have been adopted. This process should involve proper follow-up with the process owners who are responsible for implementing the recommendations, as well as board monitoring of the company’s overall progress in addressing internal audit findings. It is doubtful that improvements will be implemented if an organization fails to follow through on the execution of suggestions.

FAQs

Should a strategic plan be adaptable?

Yes, a strategic plan of any type must be adaptable. This is because changes in company demands may occur throughout the operation of your strategic plan owing to a variety of causes such as adverse economic situations, industry developments, or consumer feedback. As a result, you must define sections throughout your strategy that may need to be updated if necessary. A project deadline or budget are two examples of having an element of adaptability in your strategic plan.

What is the role of an internal auditor?

An internal auditor is a certified professional who works for a company to give independent and impartial assessments of financial and operational business operations, especially corporate governance. An internal auditor’s primary responsibility is to detect and repair problems before they are identified during an external audit by another business or regulatory agency. Internal auditors often conduct a variety of activities, such as analyzing financial accounts, expenditure reports, inventories, financial data, budgeting and accounting methods, and developing risk assessments for each department.

What is the difference between internal and external audits?

Internal auditing is intended to assist firms in meeting strategic objectives, detecting fraud, and improving operations. The internal audit may be done by a company’s internal audit department or it can be outsourced, depending on the size of the business. The management directs the scope of their work, but they preserve independence and impartiality by submitting to the audit committee or the management. External audit, on the other hand, seeks to assure investors, lenders, and other stakeholders that a company’s released financial statements depict the organization’s performance in a substantially true and fair manner. External auditors must be unbiased of the firms they audit since their primary obligation is to external stakeholders.

Internal audits can be intimidating to the employees of the company. But with an effective strategic plan in hand, and having a complete understanding of the entire process of an internal audit, the chances of the people involved in the audit being at ease will increase and the overall process will be much more pleasant. In this article, various examples of an internal audit strategic plan exist for you to have a look at in case you need help in creating one.