There are two types of audit systems, “internal audit” and “external audit”, each of which has a different audit method and purpose.
In recent years, it is said that the need for internal audit is increasing, especially for large companies. In this article, we will explain the purpose and flow of internal audit, points to note, and differences from external audit.
What is internal audit?
Internal audit, as the name implies, refers to an audit performed by someone inside the organization. It will be an optional audit.
The broad sense of internal audit is “from the perspective of legality and rationality with the aim of helping to effectively achieve the management goals of an organization.
From a fair and independent standpoint, internal audit companies in India evaluate the performance of management activities related to the governance process, risk management and control with an attitude of observing discipline as an internal auditor, and based on this, give an objective opinion.
The primary purpose of internal audit is to advise and recommend the most effective improvement measures for the development of a company, and to support its realization.
Specific support includes improving the efficiency of business activities and encouraging employees to maintain discipline and morale.
Scandals in companies, especially large companies, have a tendency to be widely talked about at home and abroad. Therefore, the need for internal audits is being called for in order to discover and resolve the risks and problems that companies have inside the company at an early stage, and to prepare the internal situation so as not to damage social trust.
Unlike internal audits, external audits are mandatory audits for companies of a certain size or larger. It is carried out by an expert who is a third party outside the company.
There are various audits depending on the law, but the Acts approved by govt. require certain companies to undergo accounting audits conducted by certified accountants and audit firms.
As an independent and impartial third party, they audit the financial information of a company and play a role in guaranteeing the appropriateness of the financial information of the company to stakeholders such as shareholders and investors, for this, you can also contact top business consulting firms in India.
Internal audit flow
The general flow from the implementation to the completion of the internal audit is as follows.
- Audit plan
- Preliminary survey
- This survey
- Follow up
Internal audit may detect fraud within the company, but the role of internal audit is not necessarily limited to the detection and detection of fraud.
In other words, internal audit plays the role of “monitoring”, which is one of the six basic elements of internal control. This is an “independent evaluation” because it is monitored by a person other than the person in charge of the work.
The results of the internal audit are reported to the management, and if fraud or internal control defects are found, appropriate countermeasures and improvement measures are taken.
With the increasing importance of internal control, internal audit companies in India are expected to play a role that goes beyond conventional audits, such as whether laws and regulations and internal rules are being followed and whether operations are being carried out efficiently. It is a monitoring function from the perspective of risk management for the entire company.