Organizations need to have effective risk management, control, and governance processes in place to be able to take advantage of opportunities and manage risks to achieve their goals. Generally, when doing an audit, top audit firms in India try to set two objectives:
- Verify compliance
- Check the effectiveness
Verify compliance
This includes verifying the correct application of the procedures, requirements, what is established in the organization chart, etc. Verifying compliance means comparing the rules with what you do to verify their overlap.
The auditor’s task, in this case, is quite simple because it will be enough for him to detect any signs of distortions in the implementation of the requirements, their non-application, or a bad interpretation of the same.
He will then have to do an analysis of the consequences of these behaviors and recommend correcting the misbehavior.
Check the effectiveness
When effectiveness is verified, in addition to compliance, a small extra step is taken to verify whether the methodologies, procedures, and work organization are effective to achieve the objectives that the organization has set itself or not.
Here, then, some questions arise in the mind of the auditor, such as:
- “Is this procedure really useful?”
- “Are these documents superfluous?”
- “Isn’t this methodology unnecessarily complicated?”
Internal Audit is considered effective when the Internal Audit has a beneficial and significant impact on the organization.
Many factors affect the effectiveness of the internal audit, below we mention three levers for the effectiveness of the internal audit.
The internal audit efficiency levers are essentially based on three axes:
Resources: first, from a quantitative point of view, it is necessary to have enough collaborators to carry out the missions provided for in the audit plan, which must cover all the risks inherent in the activities of the organization. Then, from a qualitative point of view, auditors must be able to carry out their work without interference or hindrance, without limiting access to people, tools, systems, and data.
The independence discussed here implies that internal audit is positioned on a hierarchical level at a level high enough to overcome barriers and other hierarchical silos. Finally, resources are also material, whether in financial terms or terms of tools.
In other words, the remuneration paid to auditors must be sufficient to meet the requirements and responsibilities concerning them, just as the technical resources allocated must be efficient enough to come up with the achievement of the mission objectives.
Ethics: efficiency requires credibility. In this area, the audit profession is governed by a code of ethics. It is therefore up to the auditors to respect it, whether it is a question of the rules in matters of integrity, objectivity, confidentiality, competence.
The professional behaviour of auditors should be included both in the supervision of the works and in the quality assurance program covering the audit activities.
Technicality: the auditor profession requires being a “jack-of-all-trades” since all the functions of an organization are to be audited. The top Indian audit firms ensure that all the knowledge, skills, and know-how are brought together to carry out the assignments given the complexity of the topics to be audited.
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:
CA Aman Aggarwal
AKGVG & Associates