Regular internal audits essential for retailers
Regular internal audits are essential for retailers, especially those operating across multiple stores. Daniel Jacobs, associate director internal audit at Mazars, an organisation specialising in audit, accounting, tax and advisory services, notes that the misconceptions among many businesses in this industry, could be rendering their internal audit system useless.
“This survey revealed a number of key trends within the retail sector, including a general misperception that internal controls are solely the responsibility of the company's audit department.
“When done correctly, the internal audit process should be a holistic evaluation of the organisation’s efficiency and accuracy. Therefore, it should include all departments within an organisation. These audits help the organisation to achieve its objectives, provide management with the necessary steps to drive revenue and reduce costs and foster a culture of accountability and integrity.”
Internal audits also operate independently from external audit, provide a written assessment of the effectiveness of the system of internal controls and risk management.
“The survey indicated that employees generally have a negative attitude towards auditors, viewing them as ‘police’. However, internal audit is really about improving the functioning of the organisation and not about ‘policing’ employees. When implemented correctly, internal audit can add much value to company processes and can even assist companies to prepare for and fare better with external audits.
“There are a number of global retail risks that organisations in the sector face if operations are not audited on a regular basis. These include the inability to monitor low-growth consumer markets, regulation and compliance issues, rising input prices and supply chain disruptions. Business also runs the risk of exposure to potential legal fines or penalties if they cannot identify problems or possible liability issues early on.
“In light of this, negative attitudes towards internal audit and failure on the part of the different operational functions within the company to work together with the audit department, can have a significant negative impact on the organisation as a whole. In such cases, companies risk not having a clear understanding of the specific strategic and operational risks faced by the company. It also means that the systems and process changes recommended by the audit department are not taken into account by the various departments, who then do not make subsequent changes to their own internal control processes.”
“Involving the whole company in the internal auditing process not only helps the organisation achieve its goals and objectives, but also provides valuable training and feedback opportunities for store management and personnel,” concludes Jacobs.