Internal audit
In one sentenceAn activity inside the business that regularly examines operations, controls and records, and reports weaknesses and recommendations for fixing them to management or the audit committee.
Simply put
Internal audit is the business keeping an eye on itself: it picks processes such as purchasing, the cash box or inventory, and checks that they run according to the policies.
Its result is a report of findings and recommendations, and its real value lies in following up on implementing the recommendations, not in writing them.
Example
An internal auditor at a pharmacy chain examined a month's purchase orders and found purchases approved by the same employee who requested them, so he recommended separating requesting from approving.
Don't confuse it with
External auditorThe external auditor gives an opinion on the financial statements, while internal audit serves management in improving controls and processes.