Quality standards and internal control are essential for businesses of any size. One of the universal quality standards is ISO 9000, whereas one of the means of internal control is internal audit. This work aims to discuss the use of ISO 9000 for small business’ quality systems and consider the notion of internal audit with its plan and program.
ISO 9000
To see how ISO 9000 can check small businesses’ quality systems, it is necessary to speculate what ISO 9000 is. Hence, ISO 9000 is acknowledged to be a series of international standards that describe requirements to the quality management system of organizations and enterprises. It is crucial to underline that ISO 9000 is not the quality standard of the product or service itself, so it does not guarantee the high quality of the product or service (Basu & Ray, 2015). Despite this, compliance with the requirements of ISO 9000 proves a certain level of the company’s reliability. ISO 9000 is the minimal level that allows entering the market. The certificate of ISO 9000 appears to be independent external evidence of the organization’s compliance with the quality standard (Terziovski & Guerrero, 2014). Therefore, if a small business has a certificate, it might be found reliable.
ISO 9000 aims to ensure the stable functioning of the documentary system of a company’s quality management. ISO 9000 struggles to meet the involved parties’ requirements, such as the owners, employers, enterprise, customers, and suppliers. Therefore, the accent is made on the stable success achievement. The standard helps the enterprise to formalize its management system by introducing such notions as internal audit, process approach, corrective and preventive actions. However, for a small business, the process approach does not prove to be suitable (Goetsch & Davis, 2014).
Hence, ISO 9000 is considered a fundamental standard since it provides a basis for understanding the critical elements of the system of quality management. The quality is acknowledged to be the uppermost. Therefore, ISO 9000, which defines quality management principles, should be used to check small businesses’ quality systems.
Internal Audit
Internal audit is defined as the company’s regulated internal activity, which is aimed to analyze and evaluate the company’s functioning. The processes of internal audits allow determining the efficiency and effectiveness of the company’s actions. Besides, this audit type helps managers achieve the formulated aims and improve the company’s activity. The purpose of internal audit is to assist the management in solving a particular problem on a daily basis. The main difference between external and internal audit is that the first one controls the objectivity of the correctness of the latter’s operation. In the course of internal audit, it is necessary to apply a consistent, systematic approach to the analysis of efficiency and effectiveness and the improvement of the management quality. Therefore, internal audit proves to be helpful for internal control, risk management, and corporate administration (Smith, 2013).
Internal auditors check the management units and provide managers with the necessary reasoned proposition to eliminate any drawbacks in the management. Apart from that, they give recommendations related to the increase in efficiency and effectiveness in the administration. The auditor considers and evaluates the company’s functioning from different angles and suggests methods of improvement. It is possible to apply different types of internal audits, such as functional, inter-functional, and organizational techniques, and audit, due to instructions. In each case, it is necessary to undertake an overall completed analysis of its particular structure, function, or type of activity (Smith, 2013).
The interest in such an investigation is determined for several reasons. First of all, there exists a necessity to regulate business processes. It is coupled with the management’s strive for cutting down the expenses. Besides, the board of directors or other supervisory body requires an objective and independent informant. This role might be performed by internal audit. It is especially critical for developing markets. Internal checks allow owners to be well informed about the company’s current affairs. Therefore, an internal audit is a necessary instrument of control that the owners have over the employed administrators. The owners decide to conduct an internal audit. The managers’ goal is to administrate business processes and achieve the required level of efficiency and effectiveness at the least loss. The success of this task depends on the following factors. First, the manager is supposed to have all the information required to make an optimal management resolution. Second, an effective control system which is aimed to implement the accepted solutions is expected to be available. Hence, internal audit comprises a thorough evaluation of the internal control surroundings, an organization of audit functioning, and recommendations (Smith, 2013).
Internal Audit Plan
The plan of the internal audit includes eight steps. The first step is the audit basis. The second one is the division (the supervisor). The third is the audit dates. Usually, an internal audit takes place once a year. The fourth step is the audit objects. It implies implementing different types of works and services at the enterprise. The fifth and sixth steps are the audit aim and its volume. It signifies the compliance with all the standard requirements, quality guidance, correctness in the documentation of the quality management system, and the elimination of incompliance with all the established requirements of the quality management system. The seventh step is the audit group composition. It is necessary to prepare a table of three columns to note the name, the position, and the comments. The final step is the report (Picket, 2014).
Internal Audit Program
More than 400 audit procedures are stated to be involved in the process of internal audit program preparation. They are analytical procedures, procedures in essence for each audit issue, and risk evaluation procedures in operation groups. It is possible to work out an internal audit program based on the systematization of operations into single-type groups. In this case, the following standards of the internal audit are supposed to be taken into account: audit selection, the importance of audit, evaluation of audit risks, audit evidence, understanding of the activity. In the course of the internal audit program preparation, it is necessary to arrange a list of single-type operations. If it is not done, it is not possible to single out which operations have not been checked. It is important to evaluate risks based on the group of single-type operations. Normally, this is mere accountability, which is taken into consideration. Besides, it is important to assign audit procedures subject to implementation in the operating groups. Depending on the essence of the operation to be checked, it is important to focus on the procedures which are characteristic of this operation. The auditor is not limited in the choice of procedures, though. Sometimes, it is crucial to pay attention to a certain transaction. The program should presuppose the possibility to document questions on even a single transaction to the internal audit group (Ege, 2015).
Conclusion
In conclusion, it is necessary to point out that the paper has considered the importance of ISO 9000 for small businesses’ quality systems. Besides, it has dwelled upon the internal audit with its plan and program. It is reasonable to note that internal audit appears to be a component of any organization’s control system. It evaluates the efficiency and effectiveness of the system on the whole.
References
Basu R., & Ray, N. (2015). ISO 9000 – A tool for achieving success of the training function. International Journal of Research in Management & Social Science, 3(1), 43-48.
Ege, M. S. (2015). Does internal audit function quality deter management misconduct. The Accounting Review, 90(2), 495-527.
Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. London, UK: Pearson.
Picket, S. (2014). Internal auditor at work: A practical guide to everyday challenges. Boston, MA: Elsevier.
Smith, G. (2013). Internal audit. Boston, MA: Elsevier.
Terziovski, M., & Guerrero, J.-L. (2014). ISO 9000 quality system certification and its impact on product and process innovation performance. International Journal of Production Economics, 158(1), 197-207.