27 Tips For Writing Internal Audit Report | Best Practices To Make Report Persuasive

Writing Internal Audit Report

For those who don’t know what is internal audit report, it is an essential deliverable of the audit engagement which must explain all the efforts that have been made, all the steps that have been completed, and all the decisions that have been taken while conducting the audit. It must contain the results of the whole audit process summarized with facts and supported with credible references.

You can call it a good internal audit report only if the contents of the internal audit report make the readers understand its objectives clearly along with describing the scope and findings of your audit engagement. Every company tends to have its audit report template (internal audit report layout). To make your internal audit engagement a complete success and draft the best internal audit report, it is advised to follow the rule of 20:40:40:

  • Spend 20% of your energy on developing a detailed plan for the internal audit
  • Use the first 40% of your efforts in fact-finding, making observations, examining, and conducting fieldwork.
  • Keep the second 40% of your energy reserved for the internal audit findings report.

Top 27 Internal Audit Report Writing Tips – Internal Audit Reports Best Practices

If you have been questioning yourself “how to write an audit report”, you must look for the below-mentioned tips!

1.  The best practice is to start creating the report’s rough draft from the very first day of the fieldwork. Day 1 of engagement should be your day 1 of writing an internal audit summary report to avoid unforeseen delays.

2.  Like other auditors, do you also want to be called the “bearers of bad news”? If not, then you must check your tone and selection of words. The time has changed, and now the “Give and Take” approach is preferred as it creates a favorable business environment radiating pleasant vibes. But, don’t exaggerate your positives and balance them with negatives.

3.  A report will only get a higher rating and be comprehensible when the content revolves around your core objectives. The information must clearly explain the purpose of the draft.

4.  You must have used terminologies in the report, and they must be explained for a better understanding at the end of the report.

5.  Never miss out on proofreading internal audit reports before the final presentation. Keep a review internal audit report checklist for each step to limit the risks of avoidable mistakes. It is advised to never finalize the report without checking for spelling, grammar, formatting, and factual or numerical errors.

6.  Timely reporting and communication with team members are necessary to maintain stability, transparency, and a collaborative environment.

7.  Limit writing your executive summary of the internal audit annual report to 1 page of the Word document and 1 PowerPoint slide that must not take more than 10 minutes for the readers. The senior management must keep it compact for better influence.

8.  Avoid writing material misstatements in the scope and objectives paragraphs of the report.

9.  The best internal audit report format is title cover, addressee details, introduction, scope and objectives, opinion, basis of the opinion, results, recommendations, conclusions, auditor’s signature, place of the signature, and audit report date.

10.  The standards you are following for auditing processes must be highlighted in the introduction section, for example, ISO 9001, ISO 14001, etc.

11.  Never overwhelm your report with the company’s positives. Make a “Findings Sandwich” where you will be making layers by explaining positive and negative points alternatively. Although, you better end your report on a positive note.

12.  For the content, you must use bullets to your best. It is easier to catch the reader’s attention with bullet points.

internal audit

13.  The purpose of an internal audit report is not only to explain engagement results but also to make practical recommendations and find better opportunities to make greater progress.

14.  Besides bullets, the internal audit report’s content must have tables, charts, and graphs summarizing essential stats.

15.  While writing the detailed observations, make sure that each issue comprises all 5 c’s internal audit reports (Criteria, Condition, Cause, Consequence, and Corrective Action Plans/ Recommendations).

16.  To keep the report legible and authentic, reference every point. Making unverifiable claims will make you lose your credibility.

17.  Take full advantage of indices, appendices, and tables for bridging any information gaps.

18.  Putting too much data will bore the readers. The report must have specific information to make it persuasive and logical. Eliminate redundant ideas to maintain readability.

19.  Whenever you discuss any issue, it must be explained with its root cause.

20.  We all have heard “first impression is the last impression” which is why we make a good impact with a quality cover. It must not skip any important information, including report title, name of auditor responsible, audit end date, and name of company or business unit audited.

21.  Scientifically, you can keep the audience engaged in reading one paragraph for not more than 5 seconds. That’s why keep the 3-5 second rule in mind and try covering maximum information in the starting lines.

22.  A good audit report must be drafted and critically evaluated from the audience’s perspective. You must be aware of their interests, demands, and preferences.

23.  One of the best approaches to draft internal audit reporting is to emphasize the important data by circling or underlining it, highlighting it with different colors, or changing its format to bold or italics.

24.  Mentioning particular teams or blaming others for the failures in internal control audit report presentation should not be the aim. The problem must be seen universally.

25.  Always keep the internal audit report rating system in mind to help highlight the issues accordingly.

26.  Get rid of all the unnecessary descriptive adjectives, adverbs, or pointless information from your “executive summary.” Use numbers, facts, stats, figures, and percentages while summarizing your report’s content.

27.  Always make your internal audit reporting lines brief yet understandable and move with brevity!

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7 Types of Internal Audits

internal audit

Internal audit is an analytical method that can be your valuable decision-making tool to improve business performance and management after investigating and understanding cost inefficiencies. You can significantly make organizational controls better with the help of the unbiased, independent analysis of business processes, workflows, and systems.

7 Types of Internal Audit Methods

Why internal audit?

From recognising enterprise-wide performance loopholes to getting insights into the company’s financial statements data, identifying risk areas to evaluating the accuracy of transactions – an internal audit critically assesses the completeness concerned with the organization’s financial and non-financial aspects. 7 types of Internal Audits include the following:

1.  A Compliance Audit

What is a compliance audit? It is the most practised type of IA where auditors check each phase of the process thoroughly to ensure that every workflow perfectly complies with established (federal, international, or state) laws, policies, and regulations. Finances, as well as operating controls, are critically reviewed for adherence to standards.

A compliance audit lets you highlight gaps between requirements that govern the conduct and company procedures. If your organization follows any other reporting entity, your management must stay acquiescent to the laws and regulations provided by the entity to avoid regulatory action. The nature of laws can significantly vary depending on the industry.

Failure to conform with laws or other restrictions may cause you to lose money worth millions of dollars. Or worse, your company can be suspended in certain dominions, negatively impacting your financial health.

How can internal audit add value to the business? The auditors help you stay compliant with international standards on auditing by delivering an unbiased judgement on the company’s compliance requirement and advising you on value-adding training.

2.  An Operational Audit

Simply put, it is an in-depth analysis focused on evaluating productivity, efficiency, and effectiveness of internal controls of every vital development procedure, critical business operation, and system. An operational internal audit is helpful to ensure that company’s financial and non-financial resources are utilized most efficiently and cost-effectively per the guidelines presented by the Board of Directors, without compromising professional objectives.

Operational Audit techniques are best-defined in a combination of the 3 Es: Effectiveness, Economy, and Efficiency.

Also called performance audits, they let you make significant and much-needed improvements for operating excellently. Consider an operational audit report an ideal way to assess how new management and the current staff are handling processes.

If your management fails to execute operations at its full potential, you may experience reduced profit performance, inability to achieve objectives, an unfair relationship between economy and efficiency, and unjustified use of extra resources.

3.  A Financial Audit

Internal financial audits are performed with peculiarity to objectively inspect and appraise internal control processes to get an estimate of generated revenues and expenditures. It evaluates the accuracy of the company’s financial statements to keep financial records, including transactions, up to date. Your company budgets need to be settled by comparing income to expense reimbursements.

Internal auditors provide the management with authenticated and verified figures (in the form of financial audit reports) from accounts that perfectly represent the organization’s current financial well-being. Nonetheless, it is imperative to minimize risks of bankruptcy, recognise potential weaknesses in workflows, and make enhancements to bring precision in reporting compliance to laws and regulations.

Why do we audit financial statements? Your inefficient records and false financial statements can result in huge losses of capital assets, putting you in a challenging fiscal condition.

Internal financial audit

4.  An Information Technology Audit

IT auditing is solely dedicated to evaluating IT infrastructures and performing real-time assessments to guarantee the accuracy of running applications, operating systems, and databases. This evaluation provides a 360-degree overview of the management looking after information technology environments.

Apart from determining input, output and processing controls. It is carried out to check the precision of backup and recovery plans as well as system security. It is performed alongside compliance, operational, and financial audits to give computer facility reviews (controls, hardware, software, security, documentation).

If automated information processing systems fail to perform proficiently or you are unaware that these systems are utilized effectually. Your company can lose confidential data or experience a data breach.

Why internal audit is required? Information technology control and audit help you find the loopholes and possibilities to upgrade the system, bring IT accuracy and identify processing capabilities. Without fortified and keenly appraised IT infrastructure, confidential information can be at risk.

5.  Investigative Audits

This auditing and investigation are only conducted when needed to evaluate an exceptional circumstance. The most common causes that can ask you for special investigations include:

  • Internal theft
  • Misuse of assets
  • Hotline allegations
  • Conflicts of interest

Internal audit fraud investigation is primarily required when the company has become the target of alleged federal or state laws violations. It keeps you mindful of the company’s expertise, independence, and complaints from staff.

6.  Environmental Audits

An assessment is carried out to evaluate the influence or impression of a firm’s existing operations on the surroundings. Along with ensuring compliance with environmental laws or regulations to save the planet. The internal audit function is to weigh if the management is using methods that are eco-friendly and minimizes energy consumption. Environmental Audit reports may add value to your business.

Well, your companies must be environmentally conscious and safely source raw materials to minimize environmental damage. Such as reduced greenhouse gas production.

7.  Construction Audits

Least practised internal audit (technical audit of construction projects) where inspections are performed to certify that the building is made following suitable physical development procedures and appropriate project billing. A construction project audit is beneficial to keep you adhering to the contract terms and invoicing activity as necessary.

Construction internal audit tasks are executed by development, operating, real estate, and construction companies.

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From evaluating risks to mitigating them, detecting fraud and errors to scrutinizing the economy – our internal quality audit procedure helps you improve operational internal controls and reliability over financial statements/reporting.

How To Write An Audit Report – Contents of Internal Audit Report 

audit report

To write a high-impact audit report, you need lots of practice and time with proper guidance. It must be done per the standards and in alignment with the primary objectives to effectively explain the whole audit management process. To learn how to write a good audit report, you must look for some tips and best practices.

The first step should be penning down the detailed writing format for the report. Utilizing the standard internal audit report formats provided by ISO and other organizations is always better. Brainstorm how you will present your information and what stats you will be including because overwhelming them with unnecessary facts and figures will bore them sooner. Keep the 5 C’s of internal audit report writing in mind.

You can search for audit report templates (audit report samples) to get a quick idea.

How to Write an Internal Audit Report?

Do you know the what is the best internal audit report format? For an Internal audit summary report, a standard template is usually followed to meet the core objectives and requirements that the addressee has asked for. The better the report format, the clearer the picture of the business’s financial status.

The audit report structure must have the below-mentioned sections in the same sequence but you can make slight changes such as adding follow-up section:

  1. Title & Cover

How to prepare internal audit report? Let’s start with a simple yet engaging cover that must leave a good impression. After all, it will be the first point of contact with the reader. A quality internal audit report cover page speaks for the auditor’s efforts. Your cover should provide the readers with the title, auditor’s name, the end date for audit, and the company’s name being audited. Don’t forget to mention “Independent Auditor’s Report” in the title as per the internal audit report structure.

  1. Addressee details 

Addressee means the person who will be addressed in the report, a person responsible for hiring the auditors. It is usually the shareholders of the company. Their professional life, designation, duty roles, and essential employment incidents or experiences must be highlighted. It makes the internal audit report presentation more engaging.

  1. Introduction

One of the most important headings in an internal audit report writing format! This section must highlight the significant points to have a better understanding and give a quick overview to understand why the audit report is presented, such as:

  • The area/departments being audited
  • The processes being audited
  • The standards followed while conducting an audit (ISO 9001, ISO 14001, etc.)
  • Any historical financial information
  • Any facts that readers must keep in mind while reading the report

It must be concise but legible and authentic. No false facts or unverifiable statements must be made.

  1. Scope & Objectives

As the heading implies, the scope and purpose of the audit must be explained thoroughly. After reading this section, the addressee must understand:

  • What the audit is really about
  • The reasons why the audit risk areas are of importance to the company
  • Any limitations on the scope of work completed
  • The members responsible for conducting the audit
  • Why internal controls are tested 
  • How Company’s accounts are inquired about and verified

The auditor must provide credible proof that the audit examination of the company’s financial reports has been completed per the country-wide accepted standards. The evidence must be legitimate and free of material misstatements to make the shareholders or investors believe you.

internal audit report
  1. Opinions

One of the essential sections of any internal audit report is the auditors’ opinions concerning the business’s current financial status. It can be:

Unqualified or Clean OpinionThe highest grade opinion signifying that the report is generated and maintained in full compliance with the Generally Accepted Accounting Principles (GAAP) without any misstatements in financial records.

Qualified Opinion: It is issued only if the company fails to maintain financial records following GAAP. However, the report is free of misstatements or when unacceptable disclosures are provided for the financial accounts.

Adverse Opinion: Lowest-grade opinion, or the worst type of opinion given on the internal audit review report explaining that records are neither conformed to the GAAP nor free of misrepresentations. It directly puts the company in the lousy spotlight, being called a fraud.

Disclaimer of Opinion: If the company fails to prove its financial status or the auditor is unable to determine the status due to the lack of details.

  1. Results

Once the reason for auditing is explained, issues with their root causes are identified, flaws in financial records are highlighted, opinions are made, and the final verdict of the auditors’ team is provided. The result section summarizes the major findings supported by credible references and criticizes the performance of the management in resolving formerly acknowledged problems.

  1. Recommendations 

It is a point where you suggest new action plans to meet the deficiencies of the financial department considering the records. The skilled auditors can only play an advisory role, making recommendations or encouraging them to take certain actions to get rid of problems, but the final decision will be taken by the management

  1. Conclusions

It is considered the end of the internal quality audit report format where auditors are asked to add more comments (positive or negative) that cannot be mentioned in the result section. It goes beyond the individual issues of a company’s corporate governance. You can write an internal auditor’s opinion in this section as well. Most importantly, it gives you extra space to write positive notes to appreciate the management team.

The internal audit annual report is finalized after examining the company’s internal control systems deficiencies, which have some common sections, as mentioned above.

  1. Terminologies: 

Provide a short and easy-to-understand definition for each and every term you have used in the structure of internal audit report. It makes it easier for everyone to understand the information.

  1. Auditor’s signature and Place of the signature

At the end of the internal audit reporting structure, don’t forget to add the auditor’s signature on the report for credibility. The auditor must mention the city in which the report is signed.

  1. Date of the Internal control audit report: 

Always mention the date when the auditor signed the audit report.

Create an Executive Summary

Do you really think that senior executives read every word or go through every page? Well, they don’t have enough time to do so. That’s why draft internal audit report with an executive summary highlighting key points such as important dates, procedures, factual statements, and figures.

It must summarize all data and present it to the decision-makers to determine if they need any new action plan. It must not take more than 30 minutes to read. 

In literal meanings, “it is a compact debate of the conclusions of the auditing tasks completed in a complete audit report layout.”

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