Internal audit is a systematic, independent review of a company’s operations, processes, and controls. Its main goal is to ensure that internal policies are followed, resources are used effectively, and risks are properly managed.
Companies usually carry out internal audits to verify the accuracy of financial and operational information, check adherence to policies, and give management a clear view of how different departments are performing.
Internal audits are conducted by in-house audit teams, which consist of professionals trained in reviewing processes, evaluating risks, and assessing internal controls. However, organizations also have the option to outsource all or part of their internal audit to a third-party partner.
External partners, such as Paragon Consulting Partners, have additional experience from multiple industries and provide co-sourced or fully outsourced internal audit support.
No matter whether the audit is performed in-house or externally, the following best practices will make it more fruitful for your organization. They emphasize actual audit activities, from process walkthroughs to control testing, that help management act on real evidence rather than assumptions.
1. Conduct Process Walkthroughs to Spot Bottlenecks
During a walkthrough, auditors follow a transaction or task step by step to understand how it moves through the organization. This step is important because it reveals unnecessary approvals, duplicated efforts, or workflows that create delays.
For example, an auditor might trace a procurement request from initiation to payment. They may discover that multiple signatures are required for low-value purchases, which slows operations. If they share this finding with the management, it might cause them to build and implement a strategy that streamlines approvals for smaller requests and also, keep the appropriate controls for high-value transactions intact. A small adjustment like this based on a walkthrough has proven to save hours of work each week for many companies.
2. Perform Sample Testing to Identify Repetitive Errors
Internal auditors frequently use sample testing to check if transactions or activities comply with internal standards.
For instance, an audit of expense claims may reveal that a certain type of cost is consistently coded incorrectly. Management can then provide targeted guidance or adjust the reporting system to prevent future mistakes. This method not only reduces errors but also improves the accuracy of financial data, which can influence better business decisions.
3. Analyze Control Effectiveness for Operational Insights
Testing controls is a standard internal audit practice. Auditors review whether controls are working as intended, such as approvals, reconciliations, or system checks. These tests uncover areas where controls are overly complicated or redundant.
For example, an audit may reveal that both the finance and operations teams are independently verifying the same data. Highlighting these opportunities allows management to refine processes based on factual observations. Audit teams can also provide specific recommendations for each control, so that leaders can devise concrete steps to improve efficiency.
4. Run Risk Workshops To Gather Useful Ideas From Staff
Internal audit teams often organize risk workshops to help management identify and assess potential risks in operations, projects, or new initiatives. First and foremost, define the workshop’s objectives. Decide whether the goal is to update a project-specific risk register, assess strategic risks for the upcoming year, identify operational risks for a new process, or prioritize risks for mitigation.
Next, invite participants who understand the operations or projects under review, hold decision-making authority, and share different viewpoints from functions such as finance, operations, legal, or IT. Including multiple viewpoints uncovers risk blind spots that a single team might miss. Avoid limiting the session to only senior management or risk staff.
Then, plan the agenda to cover key activities within a two-hour session. Begin with a brief welcome and explanation of objectives, followed by risk identification, scoring risks based on likelihood and impact, mitigation planning, and wrap-up with assigned actions. Prepare tools in advance, such as spreadsheets, templates, digital whiteboards, or a risk platform like VComply, and share any reference documents beforehand.
During the workshop, use prompts tied to operations or common risk categories to guide discussion. Encourage open input, score risks using a simple likelihood-impact matrix, and assign owners with follow-up tasks for high-priority risks. Capture findings visibly so participants can track what is recorded, and note broader issues in a parking lot for later review. A well-run workshop will ensure that audit findings lead to actionable steps and accountability across the organization.
Deciding Between In-House and Outsourced Internal Audit
Many organizations wonder whether to handle internal audits with their own team or bring in an external partner.
In-house audit teams know the company’s day-to-day operations and can act quickly on observations. They are familiar with internal systems, processes, and people, which helps them spot issues faster.
On the other hand, internal audit service providers like Paragon Consulting Partners step in for cumbersome audits that involve multiple departments, large volumes of transactions, or new and unfamiliar processes. They review workflows carefully and point out inefficiencies or missing checks that internal teams might miss. They also record audit findings accurately, assign action items clearly, and provide detailed, practical recommendations management to speed up workflows and reduce inefficiencies.
Some companies take a blended approach. Internal teams manage routine audits, while external partners handle specialized projects or independent checks.
The decision, in the end, depends on factors such as staff availability, audit complexity, and organizational priorities. Implement the above tips so that the audit work produces tangible improvements and does not overwhelm your day-to-day operations.
