Internal audit has long been an integral part of the most successful state, public and commercial organizations in all developed countries of the world. The increase in the dynamics of business development creates new risks and to minimize them, it is necessary to use all modern control mechanisms, one of which is internal audit.

Internal audit can be conceptualized as an element of control, which has one of its objectives, the evaluation of the company’s internal controls. The internal auditors use the survey of the system, which comprises the organization plan and the policy of procedures, to verify if it offers protection to the company’s assets and reliability in the information and data of a managerial nature.

In the second stage, it is up to the auditor, through the application of audit tests, to evaluate the operational efficiency of the system and verify if there is adherence to the guidelines established by the administration.

The information necessary for the evaluation of the system is obtained by the auditor through interviews with company employees, procedure manuals, records or documents, etc., being evidenced in organization charts, flowcharts, internal control manuals, and evaluation questionnaires, which must be periodically reviewed and updated.

The extent and nature of the audit tests to be adopted to assess the operational efficiency of the system are substantially influenced by the procedures adopted by the company. In the specific aspects in which controls are considered weak, the auditor carries out more in-depth audit examinations and or expands the scope of the same.

Risk management and internal controls are the cornerstones of good business management. Management is responsible for creating and maintaining internal controls, and the auditor’s responsibility is limited to:

• Evaluate the procedures in place and determine whether they offer a reasonable degree of confidence;
• Verify that the system is being correctly applied;
• Report the observed failures, offering recommendations to remedy them.

The study and evaluation, as well as the recommendations made by the audit, do not exempt or diminish the responsibility of the administrators of an activity.

The corrective action suggested by the internal audit, even when this action is explicitly the modification of a control procedure, does not imply the transfer of responsibility from the administrators to the auditor.

Main trends in the direction of internal audit

The global trend has been the gradual movement of internal audit from the control and audit function to the control and analytical, and in the future to the consulting and analytical.

That is, if earlier the internal auditor was positioned as an auditor, now he becomes an internal consultant. At the same time, he still has control functions. That is, there are two sides to the coin- both control and assistance. It is important to develop the right balance between them.

As it is evident, only a professional can ensure this balance and this is why we invite you to choose internal audit consulting services to better manage these things in your company.

This content is meant for information only and should not be considered as advice, legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by

CA Aman Aggarwal

AKGVG & Associates