What is an internal audit report, and how does it influence the company’s growth and development? Learn more about an internal audit report, including its definition, components, and structure. The article also answers frequently asked questions regarding the document, so continue reading to find out more.

What Is an Internal Audit Report?

An internal audit report is a document that contains the official results of internal auditing. The internal auditor utilizes this report to present the scope of the audit, outlining the positives, negatives, and significant conclusions. The information is what management needs to determine the smooth transactions of a company’s daily operations or implement necessary improvements to increase efficiency and performance plans. An audit report must be under intense scrutiny and preparation. The content must be clear, concise, understandable, impartial, and objective to guarantee that results are accurate and valuable to the organization. The report’s content must follow the standards for the business to utilize the information as a guide to set the company’s direction to follow necessary actions.

Internal audit reports fall in the hands of internal auditors. Most auditors prepare and examine financial accounts, internal controls, and corporate governance. According to the Occupational Outlook Handbook of the Bureau of Labor and Statistics, the median annual pay of internal auditors and accountants averages 73,560 US Dollars. Forecasted growth of over seven percent for auditors is possible in the following years from 2020 to 2030.

Types of Internal Audits

Internal auditors’ scope of work relies on producing comprehensive reports, considering all aspects of the organization. The emphasis of internal auditing is on constructive improvement. Internal audit helps management to identify institution cost efficiencies, improve business performance, focus on risk areas, and provide risk prioritization. Below are the types of internal audit tools management utilizes.

Financial or control audits: Financial audit contains data on accounting, including recording and reporting of necessary financial affairs. The document also reviews the efficiency of the company’s internal controls. The objective of these audits is to guarantee that the activities of different departments accurately indicate on the report.Compliance audits: Compliance audits determine if departments comply with federal, state, and company laws, rules, regulations, systems, and procedures. The failure to comply with laws, including Foreign Corrupt Practices Act (FCPA) and General Data Protection Regulation (GDPA), results in fines and fees costing the organization or a cease and desist order on operations.Operational audits: Operational audits examine the use of resources. It details whether the departments utilize their resources efficiently and effectively to fulfill daily activity reports supporting the organization’s mission and objectives. A business’ operational audit also incorporates elements of compliance, financial, and information system audit. The components of an operational audit include organizational structure, data accuracy, processes, procedures, management, and security staffing, and providing productivity and asset list.Integrated audit: The document combines a financial audit and assessment of the information technology systems and infrastructure in a department or area. Its smart goal is to assess the effectiveness of coordination between information systems and business processes. The assessment correlates with the achievement of determined goals and objectives.Information system audit: Information system audit addresses the internal control environment of digital information processing systems and their programs. It evaluates the systems’ input, processing, output, and storage systems. Aside from these principal functions, it also assesses the company’s cyber security and computer facilities. The information system audit also focuses on the real-time performance of system assessments regarding upgrades, improvements, and implementations. Special investigation: The special investigation audit focuses on violation issues relating to state laws and company regulations and policies. Investigative audits conduct necessary reports about internal theft, misuse of assets, and conflicts of interest.Follow-up audits and validation testings:  Maintaining an accurate database of recommendations and observations from audits is also the internal auditor’s responsibility. Within a specific period, the internal auditor requests status reports regarding remedial actions on a particular date and evaluates their accuracy and effectiveness for validation testing procedures. These steps are critical to assess current processes and whether revisions are necessary.

Components of an Internal Audit Report

Internal audit reports are necessary for organizations as it details any identified deficiencies and recommendations by internal auditors. There are no set standards for the format of an internal audit report. However, compiled below are the vital components you can find in one.

Background objective: The background objective section defines the audit’s purpose and the reason for conducting the auditing. It includes reasons such as high-risk perceptibility, change management, and risk fluctuations. The background objective describes the overall scope of the internal audit report.Scope: The internal audit identifies the internal auditor’s scope of work and the term they have to fulfill their duties. The scope depends on the background objective’s content. It describes the daily tasks, achievements, covered areas, and risk assessments, among others. It also details the audit report’s limitations.Deficiencies: In an internal audit report, the identified deficiencies by auditors will always be present. The deficiencies result from the overall findings from the auditing process, whether these are minor or significant deficiencies. As such, this section is the most vital part of the internal audit report.Recommendations: As internal auditors find deficiencies in the report, it is also their responsibility to provide effective recommendations and countermeasures to address these deficiencies. From these suggestions, the organization’s management decides which countermeasures they utilize to better their internal control and systems. Internal auditors cannot select which measure must take place, but they give expert advice on the best routes to follow.Follow-up and tracking: Another section of the internal audit report represents follow-up and tracking. In this section, internal auditors indicate management’s performance evaluation in addressing deficiencies. However, the follow-up section is mostly present in quarterly and annual reports.

How To Write an Effective Internal Audit Report

Aside from providing management recommendations for improvement, the ultimate purpose of an audit report is to persuade its readers to take action. The impact is everything when it comes to creating an internal audit report. Below are helpful tips to ensure the effectiveness of your audit reports to catch their attention and take action.

Tip #1: Keep the Report Concise

There are plenty of audit reports that run over a thousand words long as it gives scrutinizing details in its content. Rather than lengthening in long paragraphs of pages containing complex issues and every aspect of engagement, make sure to make the content short without missing essential details. Remember, internal audit reports are more effective and persuasive if they comply with the needs of stakeholders’ plans. Overwhelming readers with lengthy pages of internal auditing will become less efficient.

Tip #2: Keep the Report Simple and Comprehensible

An internal auditor’s report is the most impactful when using clear, direct, and familiar language to readers. Meaning, an internal auditor must utilize effective communication. Plain and articulate language can easily be read and understood, and using it sells ideas much faster. There are online tools you can use to gauge the reading comprehension of your text, and it is advisable to utilize them as often as possible. Many stakeholders can read and understand complicated dissertations, but it does not equate to being persuasive.

Tip #3: Make the Best Ideas Stand Out

Make it easier for your readers to absorb the audit report’s content. You can do this by sorting out the document to make the best ideas stand above the rest. Incorporate the use of headings, sub-headings, and call-out boxes to emphasize vital information in the audit. It is also helpful to include examples, tables, charts, and figures to highlight issues. It is also advisable to use executive summary, tables of content, and indexes to locate essential information in the report. Different stakeholders emphasize different data, and it’s advantageous to sell the necessary ideas with ease of access.

Tip #4: Remember to Incorporate the Basics

Uphold proper grammar, punctuation, and spelling. Errors relating to these writing essentials result in readers with a lasting impression that you show no care for your work. An error can considerably impact your reputation as an auditor, especially your credibility. Remember to pay attention to details. It proves difficult to be assertive and impactful to readers by losing your reliability over grammar, spelling, and punctuation.

Tip #5: Consider All Implications

It is critical to be fair and unbiased in the choice of words and sentences, considering the implications to all readers. The objective of the report is to convince the readers to buy your ideas. Meaning, the tone of your audit report must be objective. A biased and unfair tone in the internal audit report seldom equates to persuasion.

Tip #6: Utilize the Five C’s

When it comes to writing out the recommendations and observations of the audit report, keep in mind the five C’s: criteria, condition, cause, consequence, and corrective action plan. Incorporating these elements into the report increases the chance of success in persuading your reader. Describing distinct outcomes nudges management into moving towards action, as it determines who, how, and why management benefits from the audit report. It is advantageous to define consequences through business-oriented terms, accompanying them with measurable elements and specific timelines.


How do you report internal audit findings?

Audit findings are effective when stakeholders understand the issues, risks, and impact on daily operations, and provide practical solutions. To improve audit communication with your target reader, have discussions with the auditee. It is also critical to report information based on facts. Remember to utilize precision and provide clarity to your audience reading the report. Sharing background information about the objective of the report and maintaining a constructive tone demonstrates effectiveness in gaining your reader’s attention. It is also fitting to review the document and be timely in the significance of corrective actions.

What is the importance of creating an internal audit report?

The internal auditor helps executive management and boards to demonstrate they are managing the company effectively through reporting the evaluation and countermeasures of perceived risks. The mission statement of internal auditors centers on their responsibility to enhance and protect organizational value by presenting assurance, advice, and insight.

What are the challenges of internal auditing?

Internal auditors suffer from challenges in the public sector, and these challenges are also prevalent in the private industry. The challenges are as follows:

  • Lack of audit staff
  • Internal audit functions do not gain sufficient support from management
  • Lack of cooperation from other auditors
  • Lack of training and independence
  • Lack of competency and knowledge on auditing techniques
  • Management does not consider recommendations and countermeasures
  • Lack of experienced staff
  • Low grading positions of internal auditors
  • Negative perceptions from auditees
  • Limited or lack of resources

It is necessary to identify the present risks of a company and provide recommendations and countermeasures to lessen or prevent them from impacting the company negatively. Creating an internal audit report gives management the necessary details regarding negating the impact of risks in daily operations. Aside from refuting work hazards, it also improves the efficiency and performance of the business. An organization must take the time to communicate with internal auditors to provide impartial and objective results that are valuable to the organization. Create an internal audit report for your business today by using and downloading the internal audit report samples available above.