Internal audits are great at identifying problematic or even fraudulent transactions, whether in audits of payables to third parties, travel and expense audits, or other assessments. But when an internal audit uncovers improper transactions, it’s often too late. The funds have already been spent and reversing that process is never easy.
If only there was a way to review transactions, particularly large ones, before the funds are released. Well there is. Pre-audits are reviews of invoices, contracts, purchase orders, and other requests for funds to substantiate a transaction or series of transactions before they are executed and recorded. The pre-audit has been widely used to ensure that transactions are accurate in all respects and deficiencies are identified and rectified even before cash ever leaves a company’s account.
While there is widespread agreement that pre-audits are useful, there is less agreement about who should be responsible for them. There has been varying opinions as to where exactly the pre-audit function falls within a firm’s organizational chart. Is it an activity to be performed by management or to be left to the internal auditors?
Faced with this dilemma, companies often entrust the pre-audit role to internal audit. Is this the right way to go, given the tenets of a sound corporate governance structure?
Read more at internalaudit360.com - Should Internal Audit or Management Conduct Pre-Audits?