Internal audit examines whether policies, processes, and internal controls are designed and operating in a manner that protects assets, produces reliable information, and supports compliance with applicable laws. Unlike a statutory audit, the scope is agreed with management or those charged with governance and can focus on selected cycles, locations, or risk areas rather than the financial statements as a whole.
Typical coverage includes procure-to-pay, order-to-cash, inventory and stores, payroll, cash and bank, fixed assets, and statutory payment calendars. Each cycle is mapped from initiation to recording and reporting. Samples are tested against authorised limits, supporting documents, maker-checker segregation, and system access rights. Exceptions are classified by cause — design gap, operating failure, or override — and by impact on books and compliance.
Findings are reported with the observation, risk, root cause, and a practical recommendation. Follow-up reviews check whether agreed actions have been implemented. For growing businesses, internal audit also documents undocumented practices so that SOPs can be written and applied consistently as the team expands.
The output is a working file that management can use to tighten controls before the statutory audit, tax audit, or a lender review, rather than discovering the same issues at year-end.