An internal or self-audit is widely accepted as the best way to prepare for an external audit. An external audit is one that is conducted by someone outside of your company, generally an independent third-party auditor, for the purposes of verifying compliance. The motivation behind such verification varies.
- A bank may mandate an external audit as a due diligence requirement in order to provide you with banking services.
- An insurance company may mandate an external audit as an underwriting requirement in order to provide you with insurance coverage.
- A government entity may actually perform an external audit to enforce its regulations.
We recommend, as an industry best practice, that you self-audit on a monthly basis. It will greatly help you stay on top of compliance issues and be prepared for the day you will inevitably be required to submit to an external audit.