Why Small Businesses Should Embrace the Internal Audit

The word “audit” elicits dread for many owners of small businesses, but an internal audit is one of the best ways to protect one’s business. An audit can identify problems that include workplace safety hazards, accounting deficiencies, and poor IT security.

In any audit, work with a trusted partner so you can double-check each other’s analyses and conclusions. If you’re unsure where to focus your efforts, the following are some tips for conducting your own internal audit.

IT Security

Banks will reimburse individuals if someone steals their personal bank account information and makes fraudulent purchases, but most banks don’t offer that same protection for business accounts. That’s one reason why small businesses should take a hard look at their IT security and identify any weaknesses that cybercriminals could exploit. You also don’t want confidential customer data falling into the wrong hands.

Begin your audit by reviewing all passwords for devices and your network. These passwords should be unique and contain numbers, letters, and special characters. While some IT administrators will insist people change their passwords every 30 days, that’s not necessary if you have a strong password, and sticking to that schedule may cause passwords to become less creative and weaker over time. Update passwords every six months.

Review who has remote access to your systems and files and make sure you have procedures in place for disabling employee access or emails, when they leave your company. Ensure your files are regularly backed up to a secure, remote server, or to a cloud-based system.

Disaster Recovery Plans

All businesses need disaster recovery plans. As you review or develop your plan, think of all the ways disasters affect daily life – roads may be flooded or impassable, cellphone service may be unavailable, electricity outages may last for days. So while it’s a good idea to create a phone tree, which outlines who will call whom in an emergency, don’t forget to include street addresses for employees, along with the names, addresses, and telephone numbers of an emergency contact for each employee.

If it’s possible for employees to perform the essential functions of their job at a different location, you can specify in your disaster plan where to work if the current workplace becomes inaccessible. Include information about if, how, and when employees will be paid, should a disaster render work impossible.

Safety and Security

Workplace safety is of extra importance in industrial and manufacturing occupations, but even in low-risk settings, hazards may be present. Because falls are among the top workplace injuries, carefully inspect floors for objects or conditions that could cause someone to trip or slip.

Ensure your business is compliant with Occupational Safety & Health Administration regulations. Once you’ve successfully completed your internal safety audit, you could schedule a free OSHA safety and health audit, to be certain you’ve met or exceeded requirements.

Your safety and security audit should also review your ability to protect employees from hostile visitors. An obvious surveillance camera may help deter crime in your place of business, as well as provide evidence for police if a crime should occur. Camera footage may also be helpful in defense of liability claims. For example, many unscrupulous people stage slip-and-fall accidents inside businesses and sue the company for damages.

Financial Audits

Make sure you have a process in place that tracks each financial transaction. For purchases, that could include an order request form or invoice, a receipt for the order, the method of payment, and the account from which the payment was made.

You may wish to consult an accountant to ensure your tax withholdings and deductions are in order, because discrepancies or mistakes involving taxes can trigger a formal Internal Revenue Service audit.

Other Audits

An audit is just a detailed inspection of your processes, so you may choose to focus on any aspect of your business, such as human resources document management or compliance with employment rights laws.

Lusk Law, LLC, focuses on assisting small business owners, helping to avoid litigation when possible and actively representing our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to entrepreneurs located in Maryland, Virginia, Pennsylvania, and the District of Columbia.  If you need a consultation about your legal rights, please call us at 443-535- 9715 or fill out our contact form.

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