Once your financial records are well-organized, the next step in audit preparation is reviewing internal controls. Internal controls are the policies and procedures businesses put in place to safeguard assets, prevent fraud, and ensure financial accuracy. Weak or ineffective controls can lead to errors, financial misstatements, or even legal trouble—issues that auditors are trained to detect.

A good starting point is assessing segregation of duties within your organization. No single person should have unchecked control over financial transactions. For example, the person responsible for processing payments should not be the same person reconciling bank statements. This simple separation reduces the risk of fraud and financial mismanagement. If an auditor notices that one person is handling multiple critical financial tasks, they might flag it as a control weakness.

Another key area is expense approvals and authorization processes. Are payments, reimbursements, and invoices going through the right approval channels? Auditors often check whether businesses follow their own internal policies when approving expenditures. A lack of proper oversight can lead to unauthorized transactions or inflated expenses, making the audit process more complex.

Technology also plays a crucial role in strengthening internal controls. Businesses should leverage accounting software, automated reconciliations, and real-time tracking to minimize human error. An auditor will take note of whether transactions are well-documented and if there is a clear audit trail for every financial activity. A well-structured system that records who approved what and when can significantly enhance transparency.

Internal controls aren’t just about passing an audit—they are essential for protecting your business’s financial health. Regularly reviewing and improving these controls helps prevent costly mistakes, ensures compliance, and builds trust with stakeholders. When was the last time your business assessed its internal controls? Let’s talk about it in the comments.