Introduction to internal audit
Internal auditing is the evaluation of internal controls of the company, the risks involved in financial reporting and bookkeeping as well as data collection and regulatory compliance. An internal auditor reviews every aspect of the company from management’s ethics to effectiveness of strategies applied for operating activities in different departments. It is the internal auditor’s responsibility to identify inefficiencies in company’s controls, policies and procedures implemented and the financial systems. After the evaluation and analysis, the internal auditor is required to prepare financial reports as well as tactics and strategies for improving the internal controls and management of business. A comprehensive analysis is provided identifying the areas that need enhancements and refinement in order to minimize inefficiencies and risks.
An internal auditor is appointed by the auditing committee who then presents the reports prepared by the internal auditor to the board of directors (BOD). An internal auditor’s opinion is independent of any sort of undue influence since they are directly answerable to the audit committee. Even the package for internal audit is defined by the audit committee so no intimidation or self-interest threats are involved.
Purpose of an internal audit function:
One of the major objectives of internal audit is to make sure the management has prepared the financial statements with honesty and a fair view. Internal auditors are hired by the BOD to circumvent a qualified opinion (expressed by external auditor) due to fraud or errors committed by the management. The internal auditors are also required to cooperate with the external auditors during the annual audit, if reasonably required.
Internal auditors independently provide clients i.e. the management and the BOD with assistance regarding the business performance. It assesses the progress of various departments of the company and how well they are coping up with the business standards. In case of any inefficiency, the internal auditor is required to advise the management on how to eliminate such sort of wastefulness.
Internal controls of the company define the integrity and honesty of a company. It ensures whether the management has promoted an environment of integrity and truthfulness, accountability for fraud or errors and whether mechanisms, rules and accounting procedures are performed truthfully.
It is the job of the internal auditor to maintain effective controls to avoid any potential fraudulent activities as well as review all the controls in terms of costs and benefits. The internal auditor must review the consistency and honesty of financial information and the means of identifying, measuring, classifying and reporting such information.
The internal auditor must also do stock count and check up for any considerable damages as well as verify the existence of assets reported on the financial statements.
At A&A Associates, we are willing to provide all sorts of internal auditing services. We are aware of the burden an internal audit brings on the management and would be glad to assist your company in achieving your benchmarks and goals.
The reports, tactics/strategies and services provided by our qualified accountants will be tailored as per the requirements that suit your business best. The information furnished would vary depending on your requests and demand for details. Our internal auditing service can help you in the following ways:
- Full outsourcing of internal audit function
- Co-sourcing with your existing internal audit function
- Quality assurance review
- Risk assessment
- Documentation and testing of internal controls
- Operational audit
- Transformation in internal audit
- Audit of IT system
- Valuable analysis for improving your business
- Well-planned and systemized internal audit
- Process mapping and reviewing