A well-operating business relies on several key factors, including continuously assessing various work levels, areas, procedures, systems, and activities. To maintain and improve performance, businesses must implement a robust internal audit process that ensures adherence to protocols and company policies.
Also read: Types of Audit Report
Audit criteria serve as essential benchmarks in internal audits, measuring the competence, efficiency, and effectiveness of an organization’s processes and controls. They also provide a foundation for auditors to evaluate compliance with protocols, internal policies, and industry standards.
In this article, we will explore the important factors that help you understand what audit criteria are in internal audits.
What Are the Sources of Audit Criteria?
The key sources of Audit criteria are;
| Source | Description |
| Industry Regulations | Some industry-explicit rules and best practices offer criteria that are related to specific sectors. Compliance with these standards guarantees that companies fulfill industry and legal requirements. |
| Legal and Regulatory Requirements | Local and global laws and guidelines provide compulsory criteria for businesses. These requirements are important to safeguard legal compliance and avoid consequences. |
Audit Criteria in Internal Audit
Every audit has exclusive characteristics, so the audit of criteria can be challenging. However, auditors must ensure that they are appropriate, reliable, unbiased, and concise.
Here are the audit criteria that could be adopted in an internal audit such as;
Compliance With Legal Obligations
The first audit criterion in internal audit must be compliance with legal obligations. It ensures that the company works within the boundaries of the decree. It includes obeying;
- Local laws
- Global laws
- Industry-specific protocols
The regular audit helps classify non-compliance problems. It also minimizes legal risks and consequences. It is important to stay compliant to enhance a company’s status and trust with investors.
Roles of the Audit Team
The most important step for the audit team is to know their roles. The audit team must establish;
- Set the scope of the audit
- Highlights the areas and extent to be assessed
- Frequency of meetings
- Delivery date of final reports
Obedience to Industry Best Practices
Following to the best practices safeguards that a company;
- Stays modest in the market
- Meets the expectations of stakeholders
Collecting Suitable Data
Effective internal audit requires necessary and precise information on the process of the organization. To prepare so, it must cautiously examine the quantity and quality of the information it collects.
Performance Monitoring
Performance is monitored based on performance indicators and outcomes of the specific domain. It is another important audit criterion because there must be a direct bond between objectives, performance, and prospects that must be adjusted.
Also read: What is the Difference Between an Audit Firm and an Accounting Firm?
Rectification of Faults and Lacking Practices
Once the internal structures and procedures have been assessed, the audit team may find flaws in several sectors such as;
- Data management
- The use of e-mail
- The verification of customer identity
These flaws may expose the companies to financial losses and status damage in the market. The audit team will then guide remedial actions and monitor compliance with these strategies to avoid them.
FAQs
What Are the Criteria for Selecting Internal Auditors?
The key areas to assess when choosing the right auditor are;
- Experience in the specific field
- Look for Quality Control (QC) that will oblige audit firm to regularly perform quality control audits
- Open Communications
- Status
- Pricing
What Is an ISO Audit?
An ISO audit is an activity that businesses conduct. It helps to assess, check, and verify procedures related to the quality, safety, and security of products and services so that companies can guarantee the management system has been efficiently implemented.
