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Internal audit at many enterprises remains a necessary duty and is carried out “for the show”. However, with a competent internal audit firm in India, it becomes one of those tools that increase business efficiency.
What to look for to make internal audit a growth factor and not a burden for the company, we will tell you everything about in this article. Along with this, if you are planning to carry out an internal audit, we suggest you contact the best internal audit firms in India.
An internal audit involves preserving and increasing the value of the organization through objective internal audits based on a risk-based approach, providing advice, and sharing knowledge.
It is an activity carried out intending to provide independent and objective guarantees and advice, aimed at improving the organization’s activities.
What Affects the Results of Internal Audits?
According to the results of many surveys, the most influencing factors that affect the performance of a company are:
- Poorly developed culture of risk management;
- Lack of staff;
- Lack of understanding of the specifics of internal control work by the management and employees of the companies.
Below, we have highlighted some factors of the effectiveness of the internal audit.
1. Organizational independence. Internal audit firms work independently when dealing with the issue of company management. This enables internal auditors to perform their duties efficiently and provide impartial recommendations.
2. Documenting the rights and obligations of employees. Over time, the internal audit department can develop and expand the range of functions it performs. Along with this, the job descriptions of employees should also change. This will help both auditors and audited employees understand the acceptable limits of audits and avoid mutual dissatisfaction.
3. Competent leadership of experts. In addition to professional knowledge, the internal audit firms have strategic thinking and high communication skills. This comes in handy for these professionals to convey their point of view to the company’s management, as well as smooth out conflicts with the audited departments.
The effectiveness of an internal audit cannot always be quantified. In addition, it depends not only on the quality of the reviews and the conclusions obtained but also on whether the management of the company applies the received recommendations.
Therefore, each organization focuses on its own markers to assess the work done by an internal auditor.
Let’s list the most commonly used indicators:
- Implementation of the audit plan;
- The number of identified risks;
- Percentage of audit recommendations completed;
- Number of repeated recommendations;
- Satisfaction of the owners with the results of the audit department’s work.
Most often, companies use the implementation of the audit plan as an indicator of internal audit performance. In second place is the number of completed audit recommendations. The third is a survey of top management. However, there is an opinion that it is wrong to assess the effectiveness of the internal audit system based on the audit plan.
Such an indicator slows down the reaction to changes associated with external processes and risks and complicates the operational revision of plans. Experts believe that the share of identified risks gives a more indicative result. They also pay attention to how the strategic plans for the development are being implemented.