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What is an Internal Audit Checklist?
An internal audit checklist is the specific instructions or guidelines used by auditors to test a company’s financial or operational information. Internal audits are usually conducted by company employees and review the financial accounting process or internal controls of a company. Company managers use them as an informal review process to ensure that there are no material weaknesses in their financial accounting processes, internal controls or other business operations. While specific checklists may vary depending on the company’s operations, a few basic guidelines for the internal audit function may include areas like planning, gathering information, governmental regulation compliance testing, and production measurement testing.
An important part of the internal audit checklist is the planning phase between managers and internal auditors. Internal financial audits allow managers to understand how well their accounting processes function everyday and limit the possibility for fraud or embezzlement. Other internal audits may include an operational, compliance, or performance style audit. Each type of internal audit usually has its own checklist.
Operational audit checklists may include a copy of the company’s standard operating procedures for each business function and instructions on reviewing the employees responsible for conducting business operations. Items listed may include ensuring employees follow company rules, safety violations are not evident, and business inputs are being used in a proper manner.
Compliance audits may use a checklist developed from an outside organization that requires the company to follow certain rules for maintaining professional certification. The Occupational Safety and Health Administration (OSHA) in the United States is a common example, and this agency usually requires U.S. companies to undergo audits in order to maintain workplace safety certification. The guidelines used for compliance audits give managers an objective opinion on how well the company maintains the rules and guidelines of external organizations; this review allows managers to make decisions to improve business operations for maintaining certification.
Performance audits are conducted by internal auditors to determine how well individual employees are performing in their jobs or how well the company is meeting goals and objectives. These internal audit checklist items may include measuring employees' productivity or the company's performance on certain goods or services, reviewing the time spent to complete certain tasks, and comparing leading indicators from the company to the industry standard. Performance audits can help managers make decisions to improve the effectiveness and efficiency of individual business functions.
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![Auditors check to ensure that an organization's information reporting squares with its own pre-set rules and standards.]()
By: joel_420Auditors check to ensure that an organization's information reporting squares with its own pre-set rules and standards. -
![If a company decides to perform an internal audit, an audit strategy serves as the basic road map for how to proceed.]()
By: Kirill KedrinskiIf a company decides to perform an internal audit, an audit strategy serves as the basic road map for how to proceed. -
![Maintaining workplace safety is part of an internal audit checklist for many industries.]()
By: Photographee.euMaintaining workplace safety is part of an internal audit checklist for many industries.
Discussion Comments
I can definitely see why most quality internal audit checklists are planned by managers and internal auditors. These two groups of people definitely have the expertise for formulate an appropriate checklist.
Managers have extensive knowledge of the day to day working of the company. They know exactly what activities are performed, and they probably know what areas need work. Internal auditors know how to audit and probably know of a few things to look for that managers wouldn't.
Although, I could see this backfiring if the managers were trying to hide something.
@ceilingcat - That makes a lot of sense. If you're going to be audited by an outside entity, it's a good idea to do a control audit with the same criteria to make sure you're on the right track.
I think audit checklists are great for performance audits too. To make things fair, every employee should be judged by the same criteria. I feel like using a checklist is a good way to make sure you're reviewing each employee on the same thing and not letting any personal feelings or subjective ideas get in the way.
Plus, I think it protects the company too. A checklist adds transparency to the process, so no one can say they didn't know what they were being reviewed on.
I think a checklist for internal audit makes a lot of sense. Especially if you're preparing for something like an OSHA audit, where the auditor is going to be looking for certain things.
I remember one restaurant I worked at while I was in high school did an internal audit with an OSHA checklist. We were doing most things right, but there were a few things we had let slide. After the audit, we were able to correct those details.
Later on, when an actual auditor from OSHA came around, we scored very well.
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