Profit Recovery: Internal Auditing (#52)

In this podcast episode, we talk about how the internal auditing function can be used to increase the amount of profit generated by a business, by looking for excessive expenditures. Key points made are:

  • Internal auditing was usually held back from profit recovery work by the focus on control improvements that was initiated by the Sarbanes-Oxley Act.

  • Profit recovery is a great way to pay for the internal auditing department.

  • Profit recovery could be a separate function within the internal auditing department.

  • The work could be done by the procurement department, but internal auditing is the better option.

  • Can use control work to find departments that are in trouble, and then use profit recovery analyses to help them fund control fixes.

  • Could outsource profit recovery work to a third party and still generate a net profit by doing so.

  • Can pair the internal auditing staff with the third party recovery firm, to learn best practices.

  • Profit recovery work could be delayed if these tasks are mixed in with other priorities in the internal auditing department.

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Cost Management Guidebook