Internal Audit

Internal Audits evaluate a company’s internal controls, including its corporate governance and accounting processes. It is an independent objective assurance and consulting activity designed to add value and improve operations of an organization. The scope of internal auditing within an organization is broad and may involve topics such as an organization's governance, risk management and management controls over: efficiency/effectiveness of operations (including safeguarding of assets), the reliability of financial and management reporting, and compliance with laws and regulations.

What is Internal Audit?

  • Internal audit is a systematic activity which helps an organization achieve its objectives by bringing disciplined approach towards-
    1. Evaluation
    2. Risk management
    3. Control
    4. Governance
  • It provides an unbiased and objective view
  • It is a very critical function in the overall risk management system

Why do companies need Auditing

  • Auditing is mandatory for all types of companies
  • It eliminates the chances of financial frauds
  • Audited financial statement of a company influences the decision of investors/lenders

Audit Procedure-

Internal audit may take place on a daily, weekly, monthly or annual basis depending on the need. Some departments might be audited more than other if need be. For example HR department does not need a daily audit whereas a department related to manufacturing can be audited daily for quality control.

What are the scopes of audit?

People generally tend to think that the motive behind audit is just to check accounts and vouchers, but now as we know the importance of internal auditing let us see the broader functions of Internal Audit:

  • It gives a clear picture of all the financial reports and records
  • An internal audit scrutinises meeting discipline on timing and conduct
  • Staff discipline, hygiene, file arrangements and cataloguing is taken care of
  • All entries of loan applications, promissory notes and other documents are made

FAQs :

1. What is Internal Auditing?

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

2. What is internal audit process?

An internal audit is a form of audit process that occurs within the organisation to assess the conformity of internal processes and systems.

3. How does internal auditing work?

It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

4. Why should an organization have internal auditing?

Internal auditors are expected to provide recommendations for improvement in those areas where opportunities or deficiencies are identified.