Three Roles That Internal Audits Play in Strengthening Your Internal Controls
The healthcare industry is highly complex, characterized by a large volume of transactions and intricate reimbursement systems. In recent years, the rise of fraud within the sector has been driven by factors like greater reliance on technology and ongoing financial pressures. Notable incidents that have made headlines this year include a $17 million Medicare fraud scheme in California and a $6.9 million Medicaid fraud and kickback scheme in Texas. As a result, having robust internal controls has become more crucial than ever to effectively identify, prevent, and detect fraudulent activities.
Three Roles That Internal Audits Play in Strengthening Your Internal Controls
The primary objective of an internal audit is to evaluate the effectiveness of an organization's internal policies, manage risks, and strengthen governance. It is designed to add value and improve an organizations operation. The following three key roles demonstrate how internal audits are crucial to your organization:
1. Enhancing Fraud Prevention and Detection
Internal audits pinpoint weaknesses in existing controls. The identified weaknesses allow for the opportunity to prevent fraud through implementing corrective action. This process is carried out by testing controls, reviewing internal processes, and consulting with employees. Some examples of internal audits that can help identify fraudulent activities include coding audits, claims audits, inventory audits, employee payroll audits and vendor audits.
2. Facilitating Continuous Monitoring and Mitigating Risks
Internal audits play a pivotal role in ensuring that internal controls remain effective over time. Through regular internal audits, risks can be identified that may otherwise go unnoticed. Continuous monitoring ensures that internal controls are tested consistently, with fresh perspectives applied to different areas and selections. This ongoing process strengthens the overall control environment by enabling timely corrective actions.
3. Providing Recommendations for Improvements
While internal audits identify weaknesses, they also provide solutions and recommendations to correct and address the problem. Internal audit recommendations could include process improvements, control enhancements, training and development, technology upgrades or policy revisions to address identified issued. Recommending changes can allow for improved efficiencies and a streamlined process.
In conclusion, internal audits are critical to maintaining strong and effective internal controls. Regular monitoring ensures that controls evolve with advancing technology, that former employees no longer have access to critical systems, and that opportunities for improvement are identified.
If your organization is interested in learning more about how internal audits strengthen your internal controls, contact our team.
Article written by: Erin A. Hartwell - Senior Consultant
