INTERNAL AUDIT

Internal Audit indicates an independent assessment of activities inside an organization to inspect financial, accounting and other, day-to-day business practices. It gets along with a steady and crucial review of the management’s operating and financial activities reporting to the board of directors. It provides assurance on governance and internal control checks over the management activities.

What Are Internal Auditors Responsible for?
Routine internal audits ensure the company has the ability to survive in a competitive business environment, and continue to prosper. Auditors do this by:

  a. Monitoring, analyzing and assessing the risks and controls of the organization
  b. Reviewing the organization’s compliance with state and federal policies and laws
  c. Making reassurances and recommendations to the organization or company’s owners or governing boards

ESSENTIALS OF INTERNAL AUDIT
Following are some of the essentials of the internal audit:

1. Independent status: Internal auditor and the internal audit team of the organizations should have an independent and adequately high status in the management. They should have the independence to make their decisions without the interference of the other departments and should only be liable to answer the board of directors of the organization.

2. Scope of audit: Internal audit’s scope should be stated in an absolute attainable manner. The audit department must have the power to scrutinize every financial activity of an organization.
Definite objectives: Internal audit team must have a precise and straightforward understanding of the definite objectives of the organization on every assignment given to them.

3. Evolution of the department: The organization should be strict while selecting the internal audit department staff, the qualification and size of the team should be adequate with the size of the organization.
Internal audit report: A copy of an internal audit report prepared by the internal auditor should be made available to the statutory auditor of an organization. It helps the statutory auditor in understanding the internal areas of the organization.
4. Investigating actions: Internal audit department must go through proper investigation actions, and the report submitted by them should also be checked thoroughly by the management.

OBJECTIVES OF INTERNAL AUDIT 
The long-term objective of the internal audit is to help the management in achieving the most productive policy of management operations. It consists of:

1. Safeguarding the interest of the Management
The accomplishment of the above objective relies upon the following actions of the internal auditor:

a. Verifying the degree of authenticity of the statistical and accounting data developed within the organization.
b. Verifying the amount to which business assets are accurately accounted for and ensured from all kinds of losses.
c. Verifying the intensity of the compliances with entrenched policies, procedures, and plans.

2. Progression of the interests of the Management 

The objectives comprise the proposal of changes for the enhancement of different phases of the operations. This objective is accomplished by:

a. Analyzing and evaluating the plans and policies of the management.
b. Analyzing and evaluating internal evidence and procedures.
c. Analyzing and evaluating the performance governing the plans, procedures and policies.

IMPORTANCE OF INTERNAL AUDIT
Following are the importance of internal audit:

a. Specify Target Insight: It becomes challenging to find the errors or mistakes in your work. By giving a separate and impartial view, the internal audit function adjoins value to your organization.
b. Enhances the Efficiency: Internal auditor grants recommendations to enhance the efficiency and strength of your organization’s procedures and policies to reduce the business and financial risks.
c. Classify Risks and Secure Assets: An internal audit program facilitates management and shareholders by analyzing and prioritizing risks through a précised assessment.
d. Protect Compliance with Relevant Laws and Regulations: Acquiring the trust of your client and avoiding the harmful fines and damages, makes internal audit a valuable and beneficial activity for your organization.