With the expansion of activities and processes, there was a need to give greater emphasis to rules or internal procedures, given the fact that, according to the growth of the organization, the administrator, or company owner, could not personally supervise all stages of the various activities of the business.
The external or independent auditor, according to his opinion, through his opinion on the financial statements, started to issue a comment report, in which he presented suggestions to solve the company’s problems, detected in the normal course of his work of audit.
However, the external or independent auditor, according to their contractual way of acting, spent little time on their visits to the company.
In this way, to meet the needs of company management, a more permanent auditor was needed, who could perform his activity in greater depth, knowing better the various activities of the company that are related to accounting, internal controls, inventory management, personnel administration, and process administration, among others.
The importance that an internal audit has in its work activities serves management as a means of identifying that all internal procedures and policies set out by an organization, accounting systems, and internal controls are being effectively observed, and all transactions made are shown/recorded in the accounts as per the previously defined conditions.
Internal audits become important for companies from the moment it is necessary to have a business plan, to put all the parameters of a company, within what is legal, and formal. This serves to organize and measure the company’s activities, positively controlling all sectors of the organization, and offering the best solutions to solve internal problems and unexpected situations.
The mission of an internal audit is to serve as a tool to assist senior management in achieving its strategic objectives and support monitoring to improve the control environment, verifying that operations are performed by internal policies and external regulatory standards.
This assistance leads to effective management of potential and existing risks, identifying opportunities for cost reduction and gains in efficiency and profitability.
Internal audit also provides security in business management by preventing fraud and errors, protecting assets, and giving accuracy to records and accounting/financial information recorded.
Through the efficiency of organizational operations in developing monitoring and compliance with policies and procedures, companies can ensure compliance with current legislation and standards they are subjected to, mitigating the respective inherent risk.
The key functions of today’s internal audit are to ensure the development of innovation and the study of new technologies in the organization, the desire to identify and reduce emerging risks, develop creative solutions to complex business problems and encourage best practices to improve business performance.
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