GOOD PRACTICE Company audit - how does it work?

It can be inevitable and often sparks irrational fear. In reality, it is a perfect opportunity to support the development of a company. An audit in a company is always a serious undertaking that can significantly contribute to improving the organization’s efficiency. It is worth making an effort to ensure that it brings as many benefits to our company as possible.

Some say there are as many types of audits as there are enterprises. An audit in a company can cover a specific process, service, department, production line, or particular area (e.g., information security, occupational health and safety, etc.), and the functioning of these areas depends on many different factors, which vary in each company. Therefore, auditors approach each audit individually. After all, no two companies are exactly alike, so the scope of the audit may differ. However, a common feature of every audit will be the attempt to find answers to the fundamental question: how can the company’s operations be improved?

An audit can take various forms, such as internal audits, financial audits, operational audits, personnel audits, or compliance audits. In each case, the main goal of the audit is to identify and analyze risks and to highlight areas needing improvement. A financial audit focuses on analyzing financial statements and accounting procedures, an operational audit assesses the effectiveness of operational processes, while a personnel audit examines compliance with HR policies and procedures. A significant element of the audit report is also the description of corrective actions suggested to further improve the company’s processes.

The advantage of conducting an audit is primarily the involvement of an external specialist who can objectively determine which areas of the company’s operations need improvement. This involves methods such as benchmarking, conducting interviews, and indicating standards. What may be invisible to the entrepreneur can, with the help of an auditor, take concrete shape and become a task to be addressed. The auditor’s report often also includes recommendations for corrective actions that aid in further refining processes within the organization. Therefore, it is worth utilizing the audit not only when it is necessary (e.g., legally required) but also when the company is not encountering major operational problems—after all, there is always room for improvement.

Regular audits are crucial for risk management and ensuring continuous compliance with current regulations. Therefore, one should view an audit in a company as a precise optimization tool through which a specialist will identify new opportunities, rather than as a pretext for pointing out the entrepreneur’s mistakes. Regularly conducting audits allows monitoring progress and maintaining compliance with requirements, which, in turn, supports the long-term development of the organization. The content of the audit report plays a key role in this process by providing detailed information on the audit objectives and the corrective actions necessary for further improvement.

Conducting an audit involves gathering and analyzing information related to a particular issue. This issue can be framed as a question, such as: “Are the proper procedures for processing personal information followed in the company?” or “How can the process of launching a new product to the market be made quicker?” The entire procedure will then be conducted with this perspective in mind. It does not involve all areas of the company, only those that impact the resolution of the given problem. In part, its purpose is the same as the Vendor Due Diligence study. It, too, measures company’s efficiency, although such a study will usually cover the entire organization. Aleksandra Prusator, CEO at FORDATA, writes more on this topic in the article Vendor Due Diligence – the value of negotiation preparation.

The traditional form of audit relies on the visit of an auditor to the company’s premises and the analysis of collected documentation. However, internal or external audits are adopting new forms, significantly influenced by the ongoing pandemic. From the perspective of the Virtual Data Room provider, which auditors use for their remote documentation analysis, we can particularly speak of the advancing digitalization of audits.

Due to the pandemic restrictions, it has become one of the most important challenges facing the industry. Bartłomiej Kurylak, partner and statutory auditor at Polska Grupa Audytorska, writes more about these challenges in a separate article on our blog. According to Bartłomiej Kurylak, today there are situations in which the owners refuse to let the auditor into the company’s premises due to the epidemic threat. Some companies then decide to use a drone and this is no longer an unprecedented situation.

Also in the case of documentation analysis, companies increasingly use digital tools, such as Virtual Data Room, as they significantly affect the acceleration of the process and information security.

According to Bartłomiej Kurylak,

“Auditors and customers had to quickly learn how to use the available tools for remote communication, as well as the use of cloud solutions, virtual disks or document signing applications, such as Autenti. The revolution in the use of technology is still ahead of us, and the pandemic has only opened our eyes to these issues and will probably slightly accelerate some processes of digitalization of the financial audit. I am in the group of statutory auditors who see these changes as an opportunity, not a threat.“

The PGA expert also believes that “The revolution in the use of technology is still ahead of us, and the pandemic has only opened our eyes to these issues and will probably slightly accelerate some processes of digitalization of the financial audit. I am in the group of statutory auditors who see these changes as an opportunity, not a threat.“

Regardless of the form of the audit, its purpose remains unchanged. Due Diligence audits, legal audits, or tax audits are inherently designed to strengthen the company’s operations. However, some entrepreneurs’ concerns about audits stem not only from fear of penalties for oversight but also from a lack of understanding of the audit form and procedures. Technology can also provide solutions in this area, as it allows for easier organization, transparency, and security of the process. Regular audits and proper risk management are key to the effective functioning of any organization, and the content of the audit report and the results of corrective actions can contribute significantly to further process improvement within the company.