Types of Business Audit Reports

Is your Business “Audit Ready”?

Regardless of the size of any given business, continual improvement should be a top priority. Business Audits and Business Audit Reporting are essential for maximum growth and quite often required by law.

This article will review some of the typical audits that every organization should consider and be prepared to conduct on a regular basis. We will discuss the methods used to conduct each type of audit and how to benefit from the results of each type of business audit.

As always BTG will provide business audit report examples and the ever helpful business audit report samples and templates. To start let’s discuss where business audits originate and why they are important.

Business Audit Sources

Audit Checklist - Business Travel GadgetsThere are 3 basic sources of business audits: Internal, Third Party or Governmental. It is not uncommon for an organization to be subject to all three of these audit sources. Below we will offer a brief explanation of each source:

Governmental – Federal, State and Local governments all have regulations that apply to business. Most, if not all, of these regulations are law and must be complied with or serious penalties can result. If you want to do business in the United States, the government will likely require you to obtain a license or at a minimum register with the government to conduct your business of choice.

In some cases the government reserves the right to show up “unannounced” and conduct an audit of your company. I doubt very seriously if the FDA or the IRS will let you know that they are coming. And while you may not get notification from OSHA, there are government divisions that will give advanced notice.

Although there are a few regulatory audit sources that apply to a large percentage of businesses, most government regulations will apply to a specific type of business and it is the responsibility of each organization to understand where the law applies to their type of business.

Internal Business Audit - Business Travel Gadgets

Internal Auditing – Internal audits or self-auditing is a very helpful and an often required form of continual improvement. This type of audit can be replaced by or supplemented with a form of auditing called “third-party” auditing, which we will discuss next. Internal auditing occurs when an organization evaluates its own performance against a given set of standards.

Internal auditing allows an organization to “fix” issues before they become a larger problem and when performed properly can provide a blueprint for continual improvement. As you might expect, discussing the process of internal auditing can be quite lengthy and detailed, so you can rest assured that we will cover it in a separate article.

To briefly explain, an organization interested in conducting an internal audit should assemble a team of employees representing any applicable disciplines within the corporation. The team should meet regularly and develop a set of key points that apply to the given regulation and any requirements necessary for compliance.

Once the audit criteria is established the team can perform each audit point and “grade” the company on its performance related to the given standards.

The results of the audit should be a set of strengths and a set of areas of needed improvement. Often called “opportunities for improvement” or OPIs, the non-conformances should be addressed by developing actionable methods of correcting the negative observation.

Third-party Auditing – As we mentioned above, organizations may choose to “contract” the process of conducting internal audits to a third party organization. This decision could be made for several reasons, not the least of which is that the company just doesn’t have the time or resources to allocate to audits.

Regardless of the reason, third party auditing is a viable and often effective method of judging an organization against any given expectation. Third party audits are available for Finances, FDA regulations, Safety, Quality and much, much more.

Financial Audits - Business Travel GadgetsTypes of Business Audits

Financial Audits – We have listed Financial Audit Reports first because, right or wrong, this form of audit is what generally comes to mind when discussing “business audit reports. Perhaps because its most terrifying or maybe it just the most common form, but what ever the reason when companies think “audit” they think financial.

A business financial audit includes a review of the financial records of the organization and are typically searching for accuracy, compliance with standard methods and the law.

Safety Audits – There is a division of the federal government called the Department of Labor and a part of the Department of Labor called the Occupation Safety and Health Administration, often referred to as OSHA. If you are not familiar with OSHA, I highly recommend that you educate yourself with their regulations.

Safety Audits - Business Travel GadgetsOSHA publishes as set of regulations called 29CFR or The Code of Federal Regualtions Title 29. This set of regulations covers everything from ladder safety to non ionizing radiation safety. 29CFR is the law and the penalties for non-compliance are severe.

Quality Audits – Safety and Quality really need to be at the top of every Management Teams “to-do list”. We discussed the importance of safety in the previous section and will now make a case for Quality as the second most important aspect of running a successful business.

Customers expect quality and as a consumer I am willing to bet that you expect quality as well. So the

Specialized Regulatory Audits – Our list of business audit types could go on for a very long time and we will attempt to cover most of the various audits a small to large organization should understand, but for the purposes of this section we will discuss governmental audits not previously discussed including FDA, Environmental, Security and Privacy.

Any audit that pertains to a governmental regulation is commonly called a “compliance audit” and these types of audits can be critical to business continuity of a given organization. Although rare, a government organization like the Food and Drug Administration can shut your operation down which of course seriously impacts the bottom line.

Regardless of the size of any given business, continual improvement should be a top priority. Business Audits and Business Audit Reporting are essential for maximum growth and quite often required by law.

This article will review some of the typical audits that every organization should consider and be prepared to conduct on a regular basis. We will discuss the methods used to conduct each type of audit and benefit from the results of each type of business audit.

Preparing for a Business Audit

What I’m about to say will sound rather intuitive, but the reality is that many companies struggle to follow this basic strategy.  But, the best way to prepare for any type of business audit is to “Say what you do and Do what you say”.  That is to say, create procedures for your processes and follow those procedures on a daily basis.

Writing Procedure – Creating business policies and procedures can be an eye-crossing experience, but it is certainly a necessary exercise.  To accelerate the learning curve with respect to writing procedure you will first want to understand any regulations that may govern the discipline you are writing about.

Once you fully understand what is expected of your business from a legal stand point, you will have a firm foundation on which to build your program.  The next step is a bit easier, learn from those who have gone before you.  To put it simply, get your hands on someone else’s procedure and tailor it for your own purposes.

Copying and pasting should not preclude the prior step of understanding the need for the procedure you are writing, but it can dramatically accelerate the job.

Business Travel Gadgets has you covered with sample policies, examples of common procedures and generic templates to get you started, so bookmark us now.

Confirm Management Commitment – This step is critical to your success.  If you are upper management, then you will need to be fully committed to the total implementation of the given policy or procedure.  If you are not upper management, you will want to gain a solid pledge of support from those who make the decisions.

Creating a Team Environment – It is a well known fact that people prefer to be included in the rule making process.  Few employees will respond well to being “told” how to do their job. The best path to a smooth implementation of a procedure is to gain “by-in” by involving the right people.

Training – Once policy and procedure has been established the next step will be to train the appropriate people on the new programs.

Record Keeping – OK, we all know the cliche “If it’s not written down, it’s not getting done”, well that’s what record keeping is all about.  Performing a business audit will almost always include a deep inspection of your business’s records.

 

 

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