As your business grows you will need to determine whether it will benefit from setting up an internal audit function. Internal can form an integral part of a business as the department will be dedicated to reviewing internal processes and controls. Effective use of internal audit can add value to the business.
All major companies have an internal audit function. Most companies will require basic assurance over the key processes together with a documentation of the key internal controls affecting the business. The internal audit department is normally responsible for developing the Risk Matrix for the business and carrying out control reviews and branch visits. The department will focus on process improvements and for larger companies will report their findings to the Audit Committee. The most significant value add is delivered in the form of process recommendations reported to management.
For big companies, there is a major focus on avoiding surprises, particularly when reporting to the market. Most companies suffer from unwanted shocks during their lifetime and an internal audit function could help to alleviate the risk of any major setbacks arising from deficiencies in the internal control environment. SuperGroup for example suffered from reporting errors in its financial reporting to the Board. The problems arose from poor internal control over the financial reporting process and resulted in significant damage to the reputation of the CFO together with a large drop on the share price.
Internal audit must be thought of as a partnership with the business. It is significantly different from an external audit as the staff are employed directly by the business and can add significant value through process improvement.