How to make an internal audit plan?

How to conduct an internal audit that addresses the various threats impacting organizations is a crucial question for companies aiming to strengthen their risk control and management processes. Understanding how to carry out a risk-based audit process can help you identify and take action on technical and organizational risks that may stem from external, internal, technical, or human factors. Below is a step-by-step guide to help you develop and execute an annual internal audit plan.

Auditing with experts in risk management and protection systems is critical for obtaining an objective overview of the organization's status. In this context, we will refer to the approach of Professor Edwin Arley Giraldo Zapata, an expert in auditing and consulting, to define a clear process that helps manage risks and enables control and governance through a systematic and disciplined approach.

Why Internal Audits Are Crucial for Risk Management

A risk-based internal audit plan must align with the organization's strategic plan to prioritize actions effectively. Internal audits play a significant role in identifying operational, legal, and reputational risks that could affect the organization. To manage these risks efficiently, leveraging technology solutions such as Pirani is essential. This type of software helps identify, evaluate, control, and monitor risks with ease, significantly contributing to the internal audit process and the organization’s success.

Step 1: Defining the Audit Universe

The first step in any internal audit process is determining the audit universe. This means conducting a general analysis of the organization to be audited, allowing the audit team to gain a comprehensive understanding of how the processes work and what the entity's objectives are.

In simpler terms, the audit universe includes all the areas of the organization that are subject to auditing, such as human resources, financial management, technology management, commercial management, and communication management. These areas are assessed to ensure that each business function is adequately assured and protected.

A thorough understanding of the organization’s structure and operations enables the audit team to focus on key areas, identifying both strengths and potential weaknesses. This foundational step is critical for setting the audit's direction and ensuring that high-risk areas receive appropriate attention.

Step 2: Establishing the Internal Audit Plan

Once the audit universe has been determined, the next step is to establish the internal audit plan. This plan should be based on the data gathered in the first step and include critical details such as the objectives, scope, and criteria of the audit. It should also specify which units and areas of the company will be audited, the personnel responsible for overseeing the quality of processes, priority areas, and the duration of the inspections.

The audit plan must be well-documented and take into account the feedback from senior management and the board. The internal auditor responsible for coordinating the annual plan should also communicate the resources required to conduct the internal audit and assess the potential impact if these resources are limited.

To develop an effective annual audit plan, it is necessary to assess the inherent risk levels in processes, identify the requirements of the audit committee and management, understand legal requirements for internal auditing, and document any findings or improvement opportunities from previous audits.

Step 3: Annual Audit Plan vs. Resources

After identifying the projects in the audit plan, it's crucial to allocate the necessary human, financial, and time resources to execute the plan. Based on the availability of these resources, it will be possible to prioritize the projects that can be tackled, depending on their level of urgency.

Resource allocation is a critical factor in determining the feasibility of the audit plan. In many cases, organizations may face limitations in terms of budget or manpower, which can influence the scope of the audit. It is essential to carefully balance the available resources with the audit priorities to ensure that the most critical areas are addressed without overstretching the organization’s capacity.

Step 4: Communication and Approval of the Plan

Once the internal audit plan has been established, it must be presented to senior management for approval by the board of directors or the audit committee. During this presentation, it is essential to demonstrate that necessary actions have been taken to mitigate the impact of any resource limitations.

Additionally, it is advisable to inform senior management and the board about any audit tasks that have been rescheduled, explain the reasons for these changes, and discuss the level of risk associated with the rescheduled work. Clear communication at this stage helps ensure that all stakeholders are aligned and understand the audit plan’s priorities and constraints.

Step 5: Conducting the Audit and Continuous Monitoring

Once the audit plan has been approved, the next step is to execute the audit according to the defined procedures. Internal auditors should systematically review each area, evaluate risks, assess controls, and report any findings. Throughout the audit process, it is crucial to maintain ongoing communication with the audited departments and senior management to ensure transparency and address any emerging concerns.

Following the completion of the audit, continuous monitoring is essential to ensure that any identified issues are resolved, and risks are effectively managed. This monitoring can be supported by tools like Pirani, which allow for real-time risk tracking and reporting. Regular updates and follow-up audits may be necessary to ensure that corrective actions are implemented and that risks remain under control.