An audit report is a formal document that communicates an auditor’s assessment of a specific aspect of an organization, whether it be financial, internal controls, or compliance. It concludes whether the entity is in compliance with current legislation or the desired certification.
Depending on who conducts the audit, it must comply with the standards established by the Federal Accounting Council (CFC) or the recommendations of the Institute of Independent Auditors of Brazil (IBRACON).
If done correctly, the report allows key stakeholders to better understand the current situation of the organization, as well as the challenges it faces now and will encounter in the future. A well-done audit will stand out, capturing everyone’s interest and promoting the necessary changes for the improvement of the company.
Importance of the Audit Report
The audit report plays an important role in the transformation process of an organization. After all, it provides the assurance of an independent entity that a company’s processes are operating correctly.
Additionally, the auditor’s document can point out non-compliance issues, allowing the responsible sector to address the current problems. At the end of the process, when everything is in compliance with the desired standard, the organization can seek certification such as ISO 9001.
In the case of financial audit reports, their relevance is even more critical. This is because the auditor will confirm that your company’s financial information is reliable. The result can affect the confidence that stakeholders have in the organization, whether when forming partnerships or even investing money in it.
Difference Between Internal and External Audits
Although many people confuse the two modalities, internal and external audits serve different purposes. Internal audits will evaluate a company’s operations and processes, while external audits involve independent evaluations of its records and financial information.
Both are important to ensure the integrity and accuracy of an organization’s operations, as well as the reliability of its financial information.
However, they have differences in scope and the level of detail of their analyses. Internal audits will cover the following areas:
- Financial reporting;
- Compliance;
- Information security;
- Operations;
- Risk management.
External audits, on the other hand, will only look at financial statements, ensuring they are accurate and in compliance with the law.
In addition to the mentioned differences, it is important to highlight that internal audits are conducted by professionals from the organization itself, while external audits are conducted by independent auditors, usually from specialized firms.
This independence is crucial to ensure the neutrality and credibility of the external audit report. In both modalities, transparency and clear communication of results are fundamental for recommendations to be effectively implemented and contribute to the continuous improvement of the organization.
How to Prepare an Internal Audit Report
Now that you know the difference between an internal and an external audit, it’s time to find out how to ensure everything is in order with your organization’s processes.
Follow our step-by-step tips to prepare the ideal internal audit report:
1. Prepare a Cover Page
Have you ever heard the saying that the first impression is the one that lasts?
The auditor’s work should make a good impression. Therefore, it is essential to start with a quality cover page. It will be the first point of contact for senior management with the audit results. Therefore, it is important to present information such as:
- Report title;
- Name of the responsible auditor;
- Audit completion date;
- Name of the audited company or business unit.
2. Prepare an Introduction
In this section, the auditor should provide an overview with information about the audited area and processes, which standards support the work (e.g., ISO 14001), and any necessary background information before reading the full report. This way, anyone reading the report can understand the reasons that led to the audit.
For example, the report may address the emergence of new legislation that impacts the company’s operations. The introduction can describe which laws were applicable until then, where they failed, and how the new legislation proposes to address these issues.
3. Prepare an Executive Summary
The executive summary should present the conclusions of the work performed in a compact form. It should be structured as follows:
- A brief description of what was audited, objectives, scope, and start and completion dates.
- Present the auditor’s conclusions.
4. Present the Terminology Used
The next section should present the terms used in the report so that everyone can understand the information presented.
Example: if there are references to ISO, it is important to clarify that it refers to the International Organization for Standardization.
5. Present the Audit Plan
The audit plan should present the lead auditor and their qualifications, as well as other team members. This section should also describe which documents were evaluated and which people were interviewed.
The auditor should describe the steps followed during the audit — a process mapping tool can help — and the criteria used to select the evaluated documents and the interviewed people.
6. Describe the Findings and Present Recommendations
The auditor should take note when something is not in accordance with established standards, describing the findings and evidence.
At the end, the auditor should conclude the report with a “Recommendations” section for organizational improvement. At this stage, they should consider the following aspects:
- Be positive: focus on what is happening now and how the company’s positive aspects can be applied to ineffective areas or processes.
- Be specific: be very clear and specific about which aspects are not in compliance with established standards and what actions should be implemented to ensure compliance. Make it clear who needs to act to address these issues.
- Be concise: be brief in recommendations and include only the necessary information and details.
Final Considerations
Preparing an efficient audit report is essential to ensure transparency, compliance, and continuous improvement within an organization. A good report not only assesses the company’s current situation but also offers clear and specific recommendations to correct any flaws and promote best practices.
In both internal and external audits, the focus should be on the accuracy of information and clarity of communication. By following a structured and thorough process, it is possible to produce a document that not only meets legal and regulatory requirements but also adds real value to stakeholders. This way, you contribute to the sustainable growth and credibility of your organization.
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