Internal Audit: Key Elements

The internal audit service has been established in many Indian companies. Interest in it has been growing over the past years due to many factors, such as: -

• The need for owners and managers to control the processes at the enterprise;
• The need of the board of directors for an independent source of information about the state of affairs in the company.

And what is an internal audit? Is it necessary at the enterprise?

Internal audit is an activity aimed at providing independent and objective guarantees, as well as consultations aimed at improving the organization's activities.

Internal audit has the following characteristics:

1. Independence- separation of functional and administrative subordination of the internal audit service (administrative subordination to the management, and functional subordination to the founders.
   
   
2. Objectivity- the ability of best audit firms in Delhi to form impartial assessments and conclusions.
   
   
3. Optimization and increasing the efficiency of the organization. Internal audit is aimed at identifying weaknesses in management systems, internal control, making recommendations to improve the efficiency of these systems.
   
   
4. Provision of guarantees, consultations.

The result of an internal audit is guarantees and advice to clients of internal audit in the areas of risk management, internal control, and organization management. Internal audit can be viewed as an integral part of the company's internal control system, designed to perform several functions:

• To assess the internal control system for the accuracy of the information, compliance with legislation, the safety of assets, efficiency and effectiveness of the activities of divisions, as well as the company as a whole.
  
  
• Evaluate the effectiveness of the risk management system and propose methods for controlling risks.
  
  
• Assess the compliance of the management system with the principles of corporate governance.
• Evaluate the economy and efficiency of the organization's operations.
  
  
• Assess compliance with the requirements of the current legislation, regulatory and supervisory bodies, internal documents of the organization.
  
  
• To conduct special investigations of individual cases (suspicions of abuse).

The feasibility of choosing internal audit consulting service is as follows:

• This will allow for more effective control over the activities of the company's autonomous divisions.
  
  
• It becomes possible to identify production reserves and the most promising areas of development.
  
  
• Get advisory services.

It is recommended to conduct an internal audit service in stages:

• Determining the issues that the internal audit service will have to solve;
  
  
• Determination of functions that will ensure the achievement of goals, the creation based on these structural units of the service that perform these functions;
  
  
• Determination of the rights, duties, and responsibilities of each structural unit, job descriptions, and regulations on the bureau (group, sector) of the internal audit service;
  
  
• Connection of structural units into one whole

The decision to having an internal audit is made by the owners of the company, which is determined by economic feasibility.

As the size of a company grows and management processes become more complex, the role of internal audit grows.

It is a part of the management system, as well as controlled by the owners over the activities of the company's management.

Internal audit is also important for the company's management to improve the efficiency of management decision-making.

Read More: Why Shouldn’t You Underestimate the Importance of Internal Audit?