Last in a four-part series on multifaceted perspectives of internal audit

By now, most financial institutions recognize the fundamental values that internal audits offer, namely the safety net and assurance that adequate controls are in place to mitigate risk.

Beyond the obvious merits, however, there are additional intrinsic benefits that internal audits can bring to an organization. Here are just a few ways that an internal audit program supports organizational excellence.

An internal audit fosters honesty.

Internal audits protect employees from themselves, whether they realize it or not. A framework of controls sends the clear message to personnel that integrity matters. Tellers and lenders, for instance, see controls exercised effectively day in and day out. By recognizing that controls are securely in place, employees can rise above possible temptation and rise up to meet the institution’s expectations of honesty and ethical behavior.

It deepens knowledge and reinforces competency.

Internal audits give employees a greater understanding of the functions they perform and why the functions are important. By understanding each task’s significance, employees can move beyond perfunctory activity (doing something because someone makes me) to performance excellence (doing my best because security depends on it).

Much of this learning occurs through audit interviews, interactions with internal auditors, and review of audit reports. In the process, employees begin to quickly recognize where questions and responses are leading. The result is a better understanding of banking processes and an overall sense of relevance to the institution’s operations.

It promotes improvements and efficiencies.

In addition to identifying weak or overlooked controls, internal audits often lead to process improvement discoveries or efficiency breakthroughs.

For instance, conducting an internal audit of different areas might reveal redundancies, such as the same control process being duplicated in various areas. Or it might reveal that a longstanding process used by one department can now be eliminated and replaced by a strong control measure that exists elsewhere in the organization.

Additionally, exchanges with internal auditors can provide employees with new perspectives on their positions, triggering ideas for process improvements or new business possibilities.

It widens the opportunity for effectiveness.

Internal audits give personnel an opportunity to openly voice concerns, pose questions, and state opinions to someone outside their department. Employees typically welcome communication with an independent person and their candid insights can be the most valuable sources of information to an auditor, often better than what can be learned from paperwork or even by observing operations.

Financial institutions benefit greatly from this exchange. The internal audit yields highly relevant information that can help support the institution’s control objectives. Likewise, morale is bolstered when employees feel the organization values their opinions and ideas.

it paves the way for empowerment.

Beyond helping morale, internal audits within departments and across branches can help validate employees’ importance and ensure their ongoing involvement. Seeking staff input and feedback during the internal audit process underscores their value to the organization. When employees believe their job functions are crucial to the institution’s success, they will continue to present initiatives, ideas, and innovations.