Internal auditing determines how well a company maintains operational efficiency and manages accounting processes while adhering to standard rules and regulations. Internal audits investigate a company’s internal controls as well as corporate governance and accounting procedures. They provide management and the audit committee with unbiased assurance on the structure and operation of the organization’s governance, risk, and compliance (GRC) program, as well as whether the program is operating effectively across the company. Conducting audits regularly ensures that firms are adhering to administrative fundamentals and maintaining a maximum accuracy rate in financial reporting.

Internal audit is a valuable decision to streamline tasks and eliminate waste in the process to ensure continuous internal control. Therefore, it plays a critical role in business management and is regarded as an essential frame work to assist managers. In this process, an internal auditor examines the overall performance of the company in terms of administrative, executive, financial, and legal standards. The audit effectively identifies and uncovers fraud in companies and evaluates internal controls to ensure efficiency.

Internal controls and compliance

The process of adhering to obligations derived from applicable laws, regulations, industry and organizational standards, contractual commitments, corporate commitments, values, sanctions, ethics, and corporate policies and procedures is commonly referred to as compliance. Compliance is the execution of the process designed within the framework of internal control. Compliance and internal control work together to help senior leaders understand how well or poorly the business is meeting performance expectations. This understanding can then be used to make better use of resources, reduce undesirable outcomes, and improve the company’s ability to meet business objectives.

When compliance and internal control are used in tandem, they are more effective. This includes tasks such as joint planning and coordination of risk assessments, coordinated reporting to management and the board, and shared participation in compliance-related committees, task forces, and other working groups.

Audits of compliance

The internal auditor verifies that the company follows the rules, regulations, and laws of the region, state, or country in which it operates. Companies must adhere to the Foreign Corrupt Practices Act (FCPA) or the General Data Protection Regulation (GDPR) when conducting a compliance audit (GDPR). Firms that fail to comply face fines and penalties, as well as other punishments.

Therefore, internal audit and compliance must work together. To be part of your organization’s governance structure, both functions must be guided by overarching principles and executed through repeatable processes, and they must address governance issues. This is critical to your organization’s risk management, as it helps evaluate and improve risk management, and risk assessment is a critical analytical tool used to identify and assess the extent of a potential hazard.

The Bottom Line

Internal audits assist management in determining if anything is amiss in an organization. Financial reports and data collection methods are examined to determine if companies are impartial in their use of various methods to achieve their business goals. When you rely on multiple systems with multiple deployments, you risk having conflicting versions of the truth; you won’t know which set of data is complete and accurate. A standardized solution can solve these issues and create a single source of truth for your entire organization.

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