What is an Internal Audit?

Internal audit is the process of keeping a check on how the company sustains its operational efficiency and management of the accounting process while adhering to its norms and requirements. It is the process to evaluate the internal control of the company, including corporate governance and the accounting process. The internal audit evaluates the various aspects of the company. With the systematic and disciplined approach, it helps organizations to evaluate and improve the effectiveness of risk management, control, and governance process. An individual performing an internal audit is known as an internal auditor. 





Understanding of Internal Audit

Internal audit plays a significant role in the operation of the company. Managers are responsible for the accuracy of the financial statements of the company. Internal audit is performed by a professional who possesses in-depth knowledge of business culture, systems, and processes. This process assures the company that internal controls can mitigate the risk effectively and efficiently and achieve the organizational objectives. 

There is an Audit Committee to perform the whole process smoothly.  The members of this committee must be unbiased and independent of internal politics to provide a great source of information. Internal works under the internal audit committee with the management to control to review control activities. Often, reviews are called the internal audit. Internal audits might be conducted daily, weekly, monthly, or annually.

Who is  Internal Auditor?

Internal Auditor is a professional who is responsible for providing independent and objective evaluations of the financial and operational activities of the business. Internal auditors are entitled to identify problems and rectify them before the external audit. Whether it is a public, private, or non-profit organization or government agency, all of them have to conduct internal audits and have internal auditors in their organization. 

Internal auditors look into every corner of an organization to evaluate operational efficiency, check the reliability of financial reporting, information security controls, and many more. They report to the Audit Committee in the publicly traded company. 

The main three tasks that perform the internal auditor:-

  • They assess the risks and internal controls within the company
  • Auditors ensure the company and employees' compliance with state and federal laws and regulations. 
  • Provide suggestions to rectify the audit and other issues identified during the audit. 

 

Procedure of Internal Auditing

Internal auditors undergo a multitude of tasks that include examining financial statements, inventory financial data, budgeting, and accounting practices. Detailed information is taken by the employees about work schedules, verification of physical assets, and scrutinizing the financial statements to eliminate potential errors and find out the way to work effectively and efficiently. 

Then they present the findings in the formula report which briefs the whole work done and the improvements if there is a need for it. If there are any changes, the internal auditor needs to conduct a follow-up audit to make sure the advised changes are executed or not. 

Objectives of Internal Audit

Proper Control- The main objective of the Internal Audit is to properly control the organization. It maintains the financial records of the company and maintains the efficiency and management that needs proper assurance.  

Accounting System- Internal Audit thoroughly goes through the accounting systems of the organizations.  The purpose of the internal audit is to provide the authority of the transactions, accuracy in mathematics, etc. 

Review the business- The internal audit includes the financial and operational aspects of the business. During the whole process, auditors keep checking on the strength, weaknesses, and mistakes in the business. 

Protection of the Asset- It also performs the valuation and verification of an asset. If there is any special transaction such as the purchase, sale, or revaluation of assets, the internal audit performs the authorization. 

Errors- Generally, at the end of the financial year, the mistakes in the financial records are checked. However, with an internal audit company can easily spot the mistake and rectify them instantly. 

Fraud  Detection- Due to the internal audit, employees are not able to do any fraudulent activity. There will be no time in making the fraud and when the internal audit will take place, there will be no space for fraud. 

Various types of Internal Audit

There are various kinds of internal audits that companies undertake to know the errors, and financial state of the organization, control the management, and many more. Let’s have a look at some of them. 

 

Operational Audit

An operational audit is done to evaluate the effectiveness and efficiency of any department of the organization. Organizational structure, the accuracy of the data, management, assets, security, etc are some of the areas of the operational audit. 

 

Environmental Audit

The environmental audit takes place to assess the impact of the company’s operations on the environment. It is maintained with some laws and regulations of the environment. 

Compliance Audit

The compliance audit includes the laws, policies, regulations, and procedures. The variety of laws involves Foreign Corrupt Practices Act and General  Datta Protection Regulation. If companies do not follow the rules and regulations, they may bear a huge amount of fines or may also prevent from doing business further. 

Financial Audit

It is the historical and independent audit process to evaluate the process to maintain the accuracy and reliability of financial data. It ensures the accuracy of the financial activity of a particular unit or department in the financial records. 

Information Technology Audits

It is done to evaluate the information systems and infrastructure to ensure the accuracy, security, and confidentiality of the customer’s information. It includes an assessment of general IT control related to logical access, system operations, backup, and recovery. 





Wrapping it up

Internal audit is an integral part of every organization evaluating the financial status and other related issues. If you want to pursue your career in Internal audit, there are many institutions and online platforms that provide these courses. 

If you are searching for an online platform to learn all about internal audits, ecadema is the place. They provide internal auditor training with experienced professional trainers.  ecadema also provides various professional courses for working professionals or students that need to enhance their skills and increase their knowledge.  

Contact them today to know more and learn everything you want.