How Effective Is Your Internal Audit Program?

Ever heard the expression “measure twice, cut once?” This adage has long expressed a truth known in the carpentry field before making permanent cuts to valuable materials. In its more literal sense, it means woodworkers should double-check the accuracy of their measurements to avoid costly mistakes that can waste time and money.

These woodworkers essentially perform an internal audit of their own activities and add value to task execution through a systematic, disciplined approach. A disciplined approach certainly applies to other enterprises, where careful planning, self-assessment, and operational quality assurance can make executing business activities more effective.

Cannabis businesses are no exception to this rule – methodical internal audits can help ensure that your business processes operate effectively, efficiently and are working to advance considerably toward achieving company goals. Not only does this help improve your cannabis company’s operations, but it also helps to ensure staff works in a safe and productive environment while providing dependable products for consumers.

Internal Audit Program Evaluation

Your cannabis business may already have a program for internal audits, most likely through compliance teams that work to maintain regulatory adherence. While these compliance teams provide a valuable service and help avoid fines, license revocations, and other legal consequences, compliance audits rarely extend to examining the efficiency/effectiveness of operations (including the safeguarding of assets) or the reliability of financial and management reporting.

Cannabis business owners like you benefit from internal audits with a broader scope to provide the right kind of operational insights necessary for optimizing a cannabis enterprise.

What Should an Effective Internal Audit Program Do?

Highly skilled professional internal auditors should lead internal audit programs for cannabis businesses, fully certified by the Institute of Internal Auditors (IIA). Please note that these professionals are not responsible for executing company activities; they provide advice to management or similar oversight bodies regarding how to execute their responsibilities better.

Did you know? The Institute of Internal Auditors serves more than 200,000 Certified Internal Auditor (CIA) members from more than 170 countries worldwide.

Internal Auditors can come from highly diverse professional backgrounds but typically hold degrees from post-secondary educational institutions. Once an audit team has been secured, team leaders can begin the process of planning the audit projects, outlining the scope, focus, and goals of individual internal audit executions.

Audit Plan Execution: Step-by-Step

Cannabis operators who work with qualified Internal Auditors develop and execute specific processes; however, internal audits typically follow the same general steps:

1. Internal Auditors first establish the scope and objectives of the audit, communicating the information to appropriate members of management.

2. Auditors work to develop an understanding of your cannabis business area under review – this includes area objectives, performance indicator analysis, and key area processes. The process involves interviews and a
thorough review of documents.

3. Auditors will isolate the key risks facing your cannabis company’s processes within the scope of the audit.

4. Working with management, Internal Auditors will next identify management practices currently used to control and monitor each key risk. An internal audit checklist can be a helpful tool for auditors to identify common risks and adequate controls in the specific process or area being audited.

5. Auditors should develop and execute a risk-based testing approach to evaluate whether the most important management controls are functioning as intended.

6. Internal Audit teams will report the issues and challenges identified through the previous steps and coordinate with management teams to develop clear plans that address the problems.

7. Internal Auditors should regularly follow up on reported findings to ensure plans are functioning as designed.

Get with the Program

In addition to ensuring exceptional product quality, consumer/staff safety, regulatory compliance, and providing key operational insights, internal audits have long-reaching effects that streamline cannabis business management tasks and maximize operational readiness.

Measure the effectiveness of your internal assessment program by how proactively the program identifies and mitigates company risk. When developing an internal audit program, stay current on your self-assessments to avoid expensive compliance penalties.

By closely coordinating with CIAs during the planning stage, cannabis business owners gain access to the expertise of Internal Audit professionals to develop an audit program that is specific to their needs.

When you establish a comprehensive cannabis audit program, you remain prepared for inevitable external audits, identify operational problems before they impact financials, and dramatically increase the value of your cannabis brand. Avoid costly errors and contact one of our cannabis audit experts to get with your internal audit program.

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