Magnifying the internal audit process

Keeping a ship afloat means building and maintaining it using the right equipment so it could safely travel through dangerous water and reach its destination. An organization is similar to a ship. Companies range from small to big vessels, so to speak, traversing through diverse and challenging industries around the world.

To keep a strong company afloat, a topnotch deck, engine room and forecastle and other essential ship equipment — the internal controls — need to be established as the base of operations. These can help a company keep its affairs in order and have a better outcome in its operational journey. However, how does one determine if internal controls are robust? Are they enough to make a ship last for many years, or could they be the main reason for an inevitable shipwreck?

An internal audit assesses the level of an organization’s internal controls. It ensures that a company complies with existing laws and regulations in the ocean the company currently travels on and provides the necessary equipment to ensure a safe journey through tumultuous waters. Through this process, issues or lapses in prevailing internal controls are addressed and resolved.

It sounds simple, if one describes it this way. But in reality, companies struggle to monitor, resolve or even identify lapses in internal controls. This problem persists from the highest levels of an organization to the actual owners of these controls. Challenges encountered range from the initial awareness of the existence of these issues to their timely resolutions needed by the company. Even the audit group, which routinely assess these controls, experiences challenges in consolidating and manually updating the findings to be addressed by the management.

This brings us to the question: How can we upgrade the current internal audit process? If a company is like a ship floating idly in the middle of the ocean, it needs a reliable navigator to direct it in the right direction.

A company’s chosen audit issue management solution should help organizations automate
the process of tracking audit issues and monitoring the progress of their resolution in real time and without spreadsheets. Some other features to look for are being able to delegate tasks to the owners of process controls so that the open items can be easily viewed and followed up by the audit group for faster resolution. The upper management of a company should also have the option to monitor the status of audit issues.

Also, an audit management tool should not only be confined to monitoring audit issues through manual checking and updates. People in the organization should be notified of pending tasks through an available automatic email notification feature. Pending tasks should also be automatically raised to the appropriate organizational level for proper oversight.

As much as possible, the company’s audit management platform must also be web-based so that up-to-date evidence of resolution can be accessed anytime, anywhere. Seamless app connection should also be a feature, so that previous audit issues stored in spreadsheets can be integrated for efficient monitoring. This lessens the risk of using old monitoring files with issues that are not updated accordingly.

Last, a company’s audit management tool must provide its users the capability to customize audit issue criteria already identified. The use of this type of technology prevents an organization’s internal audit process from being unaware of current audit issues at hand. This enhances and sustains the flow of information from the bottom to the top level of a company, and vice versa.

Consistency in the internal audit will not only provide resolutions in the short term, but also affect the future operations of a company as it carries on with its everyday business routine. Robust internal controls are vital to the survival of an organization, so continuous assessment and improvement to get closer to the ideal organizational internal controls would not be regretted by the company.

Also, recommendations such as process improvements and advancements on how departments handle important documentation greatly enhances the prevailing “effective” internal controls.

Be the principal navigator of your organization. Do not be afraid to embrace a positive change from the very core. Aim to project the strength outward to affect overall operations and bring topnotch service to the industry as a whole.

The waves might be daunting, but if your ship is strong and you have a great navigator, you are ready to face them.

Gin Francisco is an associate consultant of the Advisory Services Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines with 22 Partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, like us on Facebook: P&A Grant Thornton, and email your comments to gin.francisco@ph.gt.com or pagrantthornton@ph.gt.com. For more information, visit www.grantthornton.com.ph.

As published in The Manila Times, dated 27 January 2021