Most businesses engage external auditors to review the work done by their employees and check for errors, oversights or irregularities. An internal auditor is a person employed by a business to do the same thing. The difference is that while the external auditor has many clients and does this work for a fee, the auditor is an employee and works within the business alongside other employees. This is an important role, as it is often the auditor who first identifies poor work quality, waste of time and materials, fraud, theft and deliberate acts of industrial sabotage.
The standard method for conducting an audit is to examine a transaction or process, compare how it was done with the way it is documented in an operating procedure or accounting convention and report to management on any differences. The internal auditor uses a range of methods to capture information, and often will have to design one-off analysis tools, or at the very least adapt an existing tool, to keep track of the information being reviewed. Spreadsheets, tables, graphs and run sheets are just some of the tools used to record information on which the final report is built.
This information is vital to management’s ability to run a successful business and continue to provide employment and value to the community. The internal auditor is responsible for reporting in a factual, objective manner, free from emotion or conjecture. It is up to management to decide the action needed, although recommendations can be made in the audit report.
Most employees do not set out to make deliberate mistakes, and often, issues identified in the audit are minor and easy to rectify. In cases where processes are more complex, errors can occur when there is a high turnover of staff and lack of attention to training new people. An internal auditor can identify that by looking at the data and talking to the employees.
The person in this role walks a fine line between management and the other employees. On the one hand, the internal auditor is an employee, and is therefore expected to serve the organization. On the other hand, the auditor is also an employee, and needs to be able to form sound working relationships with other employees. A good internal auditor needs an inquiring mind, the ability to interact with different types of people, a thorough understanding of work processes and how they are documented and the skills to prepare and present management reports.