Internal Audits are conducted for different reasons and objectives. It is helpful in optimizing multiple risk exposures of the organizations that would be needed to conduct in order to observe organizational performance. Some audits are required by proper regulations or policies, while others are requested by the management to improve organizational processes and identity internal control drawbacks.
What is Internal Audit?
Internal Audit is a concept of controlling the situation that is concerned with the examination and appraisal of other controls. The major purposes and motives of conducting internal audit is to protect the properties or assets of the business, not only from fraud but also other factors are there which helps to verify organizational effectiveness, wastes and losses.
Nature of Internal Audit
Following are the Nature of Internal Audit
The internal auditor works independently. The word independent signifies the auditing work as free from any sort of restrictions and issues. It may have a significant impact on the scope and effectiveness of the auditing review procedures and on the reporting objectives, findings and conclusions.
Internal Audit is considerable as a process where an auditor needs to inspect, control, revise and check the matters related to financial and economic situation and possibilities in the organization. Auditor needs to focus on proper regulatory frameworks and obligations, so that thorough analysis of taxation, financial and regulatory compliance.
3.Risk & Deviation Analysis:
The Internal Auditing process is also objectivized for risk management and deviation analysis. Auditor needs to control the financial activities and situations of the companies. They need to follow major objectives to lead financial decisions of the companies. With effective and proper supervision of auditing, auditors can easily compare the actual situation with the projected situation to reach the right conclusion.
Sometimes it happens when companies need to audit each procedure and criterias related to management and operational functions. When the situations are uncertain and the company needs to make strategies to control such situations, the Internal auditor follows major objectives to measure the company's performance and achievements.
Scope of Internal Audit
1.Reliability & Integrity of Information: The internal auditor should review and optimize the effectiveness of financial statements and business processes in order to examine reliability and integrity of the information. It helps the company to identify, measure and classify and to report such information.
2.Compliance with Policies & Procedures: the systems and procedures are also totally considerable and impactful on the operation of the business enterprise. The internal auditor should gauge the effectiveness and efficiency of such systems and report thereon.
3.Safeguarding assets and liabilities: the internal auditor has to review and observe the existing business systems and procedures in order to safeguard the assets and liabilities of the business. If necessary should verify the existence of such assets.
4.Service: Internal audit is a service to the whole organization. The internal auditor is an employee of the organization. His services can be availed at any time of emergency. His advice can be obtained on any matter or point significant from the business and strategic point of view.
5.Economical and efficient use of resources: The internal auditor should also appraise the economy and efficacy with which the resources are employed. Further the internal auditor should identify the conditions, which would prevent the economical use of resources. They are as follows:
●Underutilization of capacity
●Financial performance measurement
●Over & Under statting
The internal auditing should make a review of the operation or programmes of the company. They should ascertain the business outcome and results that are not consistent with the established goals & objectives of the enterprises. They should also ascertain whether the programmes are carried forward as per plan or not.