When to Carry Out Internal Auditing

Written by Economic Development Jobs on March 13, 2019. Posted in Internal audit, Prioritization of risks, Supply chain management

Auditing, for those not yet familiar with the term, describes the act of investigating and looking over a person or business’s financial records, bookkeeping, tax information, and more. Put simply, it is an effort to look over all money-related information from a person or business, and doing so can be very important. A company may undergo internal audits to ensure that all records are consistent, and identification of risks or trying to identify opportunities for operational improvement may be possible. Risk management is one goal of an audit, and internal audit co-sourcing is one way to get this work done. An employee who is new to business may have to learn how and why auditing is done, not to mention internal audit co-sourcing work. What is there to know about audits to day and internal audit co-sourcing?

Internal Audit Co-Sourcing

What does it mean to carry out internal audit co-sourcing? According to Journal of Accountancy, internal audit co-sourcing describes a partnership that is formed between a customer and one outside vendor, or a professional service provider. If a complex job related to auditing needs to be done, a client company may hire a vendor who will work alongside in-house staff. This vendor is not replacing the skills or labor of those in-house employees, however; they work side by side. Once the job is done, the vendor’s work is complete, as well.

This is related to audit consulting, but the difference here is that a company’s in-house workers will still have an active role to play. Those employees work alongside the vendor in managing resources and creating a plan or solution, rather than outsourcing all of this labor to the vendor. It is a cooperative effort, and that sets it apart from consulting work. Co-sourcing can be done for many types of work, from IT solutions to coordinating with international businesses as interpreters and translators. This work can also be done for engineering or other creative solutions. And of course, this can also be done as internal audit co-sourcing. An audit can go a long way toward getting a company’s finances back on track if their tax information, bookkeeping, and other financial data is misaligned. Bad data could spell trouble when the time comes for corporate taxes, so an internal audit can set everything straight.

What sort of company might opt for internal audit co-sourcing? For example, a company that is rapidly growing and getting into global markets may need to diversify to fit several business lines. Each of those business lines may specialize for niche markets, and internal audits can help keep all of this in line as the company grows. As a company grows and becomes more diverse in function, it may be necessary to perform some risk-evaluation and strategizing, and an internal audit may get this work done. However, outsourcing all of this auditing work takes the power out of the company’s hands, and many staffs may not like that. Instead, a co-sourced audit may be the most effective solution.

Once this work is underway, an internal audit done by co-sourcing can accomplish many objectives as needed. For example, a company’s audit work may result in risk evaluation, such as for money lending services. A company that starts offering mortgages for homes or financing for car dealers would not want to make bad loans, so an internal audit can help with this. Hedging strategies and determining standard industry strategies may be done as well. And of course, if a company’s finances have been sloppily handled, an audit can diagnose this problem right away. As a company grows larger and more diverse, its bookkeepers and financial reports may start to become inconsistent, often through human error or incompatibility with different departments. This could spell disaster when the time comes for business taxes, and there may even be penalties for inaccurate tax claims or unpaid taxes. An internal co-sourced audit can get everything back in line and consistent, and this may be vital work to do if tax time is drawing near. And with co-source audit work, the business will have a hands-on approach as it coordinates with the outsourced labor.

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