Under conditions of economic uncertainty and increasing competition, the role of objective economic control is growing, both on the part of owners and supervisory authorities.
Reliable financial reporting provides an opportunity to make informed economic decisions and protects against transactions associated with increased risk.
The opinion of internal audit consulting firms in India increases confidence in the company’s financial activities and general loyalty to the business on the part of stakeholders – owners, investors, potential customers, suppliers, and authorities.
In connection with the foregoing, we will consider such forms of control as internal audits, the tasks and mechanisms of this type of audit, as well as factors influencing the choice of an internal auditor.
Internal audit services exist, as a rule, in companies with an extensive network of branches. Control from the inside helps the management to carry out more competent management, correctly evaluate the use of assets, analyze the effectiveness of financial investments, etc.
Conducting an internal audit is voluntary. It is carried out to solve the following tasks:
- Check the correctness of the reporting and the reliability of the information indicated in the reports;
- Evaluate the correctness of accounting;
- Evaluate the efficiency of resource use, timeliness, and completeness of tax deductions, settlement, and payment discipline in general;
- To study the reliability of accounting for production costs, revenues, and other indicators of financial and economic activity;
- Develop proposals for improving the settlement discipline and accounting;
Internal auditors, as a rule, advise the heads of departments and employees responsible for specific areas on legal, financial, organizational, and other issues, and help to eliminate the shortcomings identified during the audit.
The owners of the company can initiate the organization of an internal audit to determine how conscientiously the involved managers conduct the affairs of the company.
An internal audit can be ordered by the head of the enterprise, for example, when changing the chief accountant. He, in turn, also has the right to request an audit, especially if different areas of accounting are assigned to several employees.
The objects of verification are material, labor, financial resources and their sources, economic processes, results of economic activity, and methods of enterprise management.
The company determines the procedure for conducting internal audits and methods independently. Verification can be comprehensive or thematic (coverage of individual areas), selective or continuous. With a partial check, the risk of missing errors and shortcomings increases, so accounting documents, as a rule, are checked in full.
The main principles of audit activity – independence and objectivity – also apply to internal audits. However, most experts admit that absolute independence in the conduct of the internal audit procedure is hardly achievable.
At least because the auditors are employees of the same company, their career, and professional well-being directly depend on the decisions of management.
In addition, the internal audit department, as a rule, is subordinate to the head of the unit or the financial director. And this also leaves its mark on the attitude of managers at different levels to the recommendations that will appear during the audit.
In such conditions, it is extremely difficult for internal auditors to freely and objectively fulfill their duties, and to express their own opinion without regard to higher managers. This problem has different solutions.
For example, you can choose Internal Audit Outsourcing in India. In this case, the audit will be independent of the functional management of the company.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by
Aman Aggarwal
AKGVG & Associates