Before we start with internal audit we should understand, what is audit?
Audit is a process of examination or revalidation of the work done other than the core owner of the that area or work done by the person.
Audit is basically done by external agencies or internal agency. External agencies are customers, government agencies or third party agencies.
Customers do Audit to check how well their product is manufactured, and all compliance are followed during production of their product that are mutually agreed in the contract. Customers also do initial audit to check whether company is able to give them as per desired requirement in terms of quality and quality and some other special requirements.
Government agencies do Audit to check is company is following legal compliance that are required to run the company. Tax, safety of employees, safety of women, control of environment are some examples of leagal requirements.
Third party agencies are hired by the customers, government or even by company itself to check all work in the company is running as per process, they are hired specially to find out that if there are any fraud is going on in the company specially in terms of finance, legal and quality.
Apart from above external audit we have internal audit also they are just like practice test before any external exam. Internal audit helps company to prepare for external audit. It is said that if internal audit is strictly done then there will be less observation during external audit.
What is Internal Audit?
Internal audits are audit done by members of the company to ensure that process is running as per the define system. Internal audit is self examination of the company performance on different fields, like legal, finance, system, process, etc.
Internal audit is done by the internal auditors who are trained as the per the requirement of the audit. There is clause in ISO certified that it is compulsory to due internal audit if company is having any ISO certification. ISO19001 tell about internal audit and how to perform Internal audit.
According to IATF16949 the organization shall have a documented process to verify that internal auditors are competent, taking into account any customer specific requirement it.
For a good internal audit it is important that the internal auditor is competent enough to demonstrate the audit and understand the core tools related to the audit and technical knowledge about the the process for which audit is conducted.
Organisation can decide the number of audit to be conducted in year. Minimum one audit in a year should be conducted by the organisation. If organisation is weak in any of the audits then number of internet can be increase. Organisation can plan even one internal audit in a quarter.
Although Internal Audit is time consuming and extra investment but Internal Audit is essential to find week points in the organisation. Most of the organization have separate department which is responsible to conduct internal audit which is directly report to the CEO or the head of the organization.
Things to be remember by Internal Auditor:
Internal auditor is a employee of the organisation which conduct audit internally and report about audit to the the seniors of the audit department or directly to head of the function. Internal auditor should be well aware about rules and regulations of the audit and fulfill all the compliances of the internal audit.
It is important for internal auditor to be unbiased while conducting audit and very fair enough in observations, which help organisation to improve the weaknesses and prepare for the external audit. Internal auditor should give the clear picture of the organisation to the seniors of the audit departments. Internal Audit should be conducted similar to the external audit.
Internal Auditor should plan the audit and give the schedule of the audit to the concerned departments and head of the function. In the schedule of the audit Internal auditor should give proper detail of time, duration and venue. Internal auditor should cover all the departments of the organisation and very fair in doing the audit.
Process of Internal Audit:
For the success of internal audit it is important that internal audit should conduct in a systematic way.
Following are the steps to conduct an internal audit:
- Planning
- Auditing
- Reporting
- Follow up or Review.
1. Planning:
Success of any process is well planning of doing the work. It is important that Internal auditor should well plan the internal audit schedule and circulate well in advance so that HOD can prepare for their audits and well plan their work. In internal audit schedule the internal auditor should also define the scope and objective of the audit. He / She must follow the time lines for each audit. If multiple department is doing audit he must define time schedule for each department and also define venue of the audit. Before conducting audit he must well aware about the last NC (non conformity) of the particular demand. Do some home work related to audit before doing audit. He must also read the clauses related to the audit and must aware about new addition or changes in rule and regulation of related audit.
2. Auditing:
Main work of any auditing is auditing it is also called as fieldwork. In auditing Internal auditor or team should follow audit plan done in planning phase, work accordingly to the define schedule. It include from opening meeting to closing meeting. In auditing the auditor questions or ask auditee about the process. It is important for an auditor that auditee must understand clearly what auditor want to say. Auditor start with control plan or process of the auditee and check samples for related documents and verify the process that auditee is doing what is written in process of the company. He can also check product quality also if required. Auditor must check KPI (Key Performance Indicator) or object and target of the auditee and if there is any gap, then can ask for the action plan or root causes for the gap generated in the system. He also check good work done by the auditor.
3. Reporting:
Reporting is an important part of any audit, so it should be written very clear and understandable language. Some auditor start writing report during audit only and some prefer to write after physical audit is complete. It is recommended that during audit, auditor should roughly written during audit and write complete report after completing auditing. In report good points should also mention and observation should be written with proper clause number. In report it is important that proper finding should be written with proper document number and shift, time during auditing of the process, so that reporting should be clear to both auditor and auditee.
4. Follow up or Review:
Last part of any audit is to review the progress of improvement or closure of non conformity. It is important part as in this phase only improvement in process or system is done and crush of the audit is come in this session only but most of the internal auditor neglect this phase. It is important for internal auditor to check whether auditee is working on finding, if there is any issue to fill the finding internal auditor should suggest what to do and how to do to get the work done correctly. Once the work is done, it is also important to follow up work after some time, so that the consistency of work is maintain and result çan be visible for longer periods of time.
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