The essence of the internal audit activity is to provide guarantees and consultations to customers. At the same time, the scope of providing guarantees and advice has significantly expanded in recent years and includes the following main areas: risk management, internal control, and corporate governance.
Why is it needed?
Many factors determine whether a company needs an internal audit. These primarily include separation of the functions of owning and managing a business, the size and structural ramification of the company, the level of risks inherent in the company’s activities.
In cases where the business owners are the managers of the company and themselves fully control all aspects of the business, the internal audit function may not be necessary. (Read More: Identify Opportunities For Improving Business Efficiency With Internal Audit)
But with the growth of the size of the company and the increase in the complexity of management processes, the owners may have the illusion that the business does not change much, and all aspects of the company’s activities are under control.
But in fact, the leadership already lacks the physical ability to control the situation in its entirety. And then the internal audit will be very useful.
The auditor has information on all aspects of the company’s activities and tools for summarizing and analysing data, so close interaction with him increases the efficiency of decision-making.
It is the internal audit that is the source of information that helps the manager to look at things objectively, “not with a blurry eye” and evaluate the quality of implementation of the management decisions.
In any case, the larger the company and the more separate subdivisions it has, the more in demand the function of independent assessment of the state of control and, at the same time, the function of an objective information source, which is internal audit, will be in demand.
Within the framework of two types of activities- providing guarantees and consulting- modern internal audit performs a variety of audit tasks, which include:
- Analysis and assessment of systems of internal control, risk management, corporate governance;
- Investigation of cases of fraud;
- Assistance in the work of the external auditor;
- Participation in special projects (usually of a consulting nature).
To face and manage the sudden changes in the competitive scenario, the new laws and regulations, and the continuous technological innovation, companies must be agile.
In the management of a company, this means achieving ‘integrated’ compliance of administrative activities to translate the heterogeneous legislative, regulatory, and procedural context that affects accounting, tax, and legal obligations into processes.
Globalization, technological innovation, regulation, market volatility fuels the debate on the future of auditing services in India and on the evolution of the activity of auditing firms.
In this scenario, the stimulus for change emerged, expanding the range of services, in the awareness of the importance of the role of the auditor for the trust of stakeholders.
Audit consulting services strengthen the transparency and credibility of companies, have the aim of providing comfort to both financial and non-financial information, and represent an element of qualified communication towards stakeholders, shareholders, customers, suppliers, investors, and regulators.
A lever to achieve an important competitive advantage in the capital market, in the context of commercial agreements, and the growth path of companies.
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