An internal audit is a thorough internal evaluation of a business’s controls and accounting process. An internal audit's purpose is to help ensure that a business remains in line with federal, state, and local laws and regulations, and help to maintain the accurate and timely reporting of its financial data.
Internal audits are performed by an internal auditor, who is typically an employee of the company they are auditing. During an audit, the internal auditor will observe a specific department, take thorough notes, review financial documents, and interview department employees.
Internal audits can be conducted on a daily, weekly, monthly or annual basis depending on the type of circumstance and what type of audit schedule fits a business best.
Once an internal audit is concluded, the auditor will identify areas of concern in a department and present them to management in an understandable way. This is done via an auditor's report, consisting of a written statement attached to the company’s financial statements that expresses the auditor’s opinion on the company's compliance with standard accounting practices.
Once the auditor’s report is finalized, expectations on necessary corrections are given to management that will need to be made. Both management and the auditor will commit to a timeline to make these changes to fix issues. Once all of the changes are implemented in a manner that the auditor deems correct, the audit is officially closed.