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The need for a consultation with internal audit companies in India is often predetermined by the fact that the owner or manager wants to know the real situation in the enterprise.
The administration of the enterprise develops policies and procedures for the work of the company, but the person cannot always understand them to follow their instructions for one reason or another.
Through an internal audit, the internal audit firms in India increase the efficiency of management of enterprises of various organizational and legal forms.
Today, the practice of internal audit in most companies is formed under the influence of several negative factors:
- Internal audit often performs the functions of internal control (the principle of objectivity in the assessment is violated);
- Internal audit is mainly accountable to the general (financial) director of the enterprise (independence in the assessment is violated);
- The importance of the internal audit function is underestimated;
- There is no legal basis for internal audit and control.
Internal audit is often confused with internal control. So, what are the differences? Let’s note the main differences between internal audit and control:
1. Accountability:
Internal audit – the main requirement is independence, according to world practice is accountable to:
- Functionally – the authorities;
- Administratively – to the directors of the company;
Internal control is one of the main functions of enterprise management, functionally and administratively accountable to the management of the company.
2. Objectives of the activity:
Internal audit is an objective assessment of the risk identification and management processes, as well as the efficiency of the internal control system. Thus, an internal audit cannot interfere with the operating activities of the company to maintain objectivity in the assessment.
Internal control involves the creation of an internal control system (risk assessment, control policies, and procedures), which provides management with guarantees that the set goals will be achieved.
Thus, internal control contributes to the creation of an effective risk assessment and management process (risk management), and the introduction of the need for control aimed at improving the efficiency of operations, the reliability of financial reporting, and compliance with the law.
Internal audit firms in India carry out an independent expert assessment of the management functions of a firm or company.
They provide the management firm with analysis, assessments, recommendations, advice, and information on the activities of the auditee. The internal audit considers accounting information and its accuracy.
The scope of internal audit in different organizations may differ, which is due to the different sizes and characteristics of the structure of the economic entity, as well as the requirements of the management.
Typically, the internal audit includes:
- monitoring of internal control;
- analysis of financial information, namely, a review of sources, measurement procedure, classification and reporting on this information, detailed testing of individual transactions, accounts, and procedures;
- checking the effectiveness of the operations performed, including non-financial control over the activities of the organization;
- Review checks of compliance with legal requirements, as well as compliance with management decisions.
Internal audit is one of the ways to control the legality and effectiveness of the activities of all divisions of the enterprise. Internal auditors work in both the public and private sectors.
Thus, it can be said that the internal audit is a systematic and strictly documentary, continuous, and universal measure for enhancing business operations.