Complete guide on Internal Audit in India
Internal Audit in India is one of the major areas which aid the organization in enhancing business performance by identifying the growth areas with greater scope for improvement. The process of Internal audit helps in reviewing the existing systems and their effectiveness by benchmark the audit processes and procedures against the best industry practices to meet the global standards.
Internal audit evaluates and improves effectiveness of an organizations risk management, control, governance and accounting processes. Internal audit is performed to identify potential risk (such as misappropriation of assets, misuse of funds, frauds, manipulation of records) an organization may be prone to, managing those risk and reporting on such risk and their management as per statutory requirements.
Internal Audit Objectives:
Internal audit is performed to give assurance to top level management that the risk associated to business are identified and managed properly. It is conducted to provide assurance that management of an organization has an ability to manage risk effectively. It also ensures that governance and internal control processes are operating effectively.
5 Reasons Why Internal Audits are Important
Internal auditing programs are critical for monitoring and assuring that all of your business assets have been properly secured and safeguarded from threats. It is also important for verifying that your business processes reflect your documented policies and procedures.
Let’s take a look at five reasons why internal auditing is important and their purpose in keeping your organization compliant with the common frameworks and regulations.
- Provides objective insight
- Improves efficiency of operations
- Evaluates risks and protects assets
- Assesses organizational controls
- Ensures legal compliance
Basic Principals of an Internal Audit
For an internal audit function to be considered effective, the basic Principles should be achieved. Failure to achieve any of the Principles would imply that an internal audit activity was not as effective. The basic principles governing internal Audit are
- Demonstrate uncompromised integrity and independence;
- Display due professional care while performing Audit;
- Demonstrate commitment to competence;
- Maintain Confidentiality;
- Assessment of Risk element and having adequate resources to address it;
- Focusing on Systems and process i.e., Root Cause Analysis;
- Participating in decision making, other than those subject to subsequent audit;
- Adopting procedures to continuously improve the quality of internal audit process and audit reports;
- Align strategically with the aims and goals of the enterprise;
- Achieve efficiency and effectiveness in delivery;
- Communicate effectively;
- Provide reliable assurance to Those Charged with Governance (TCWG);
- Be insightful, proactive, and future-focused.
What is an internal audit report?
An internal audit report is a document with the formal results of an audit. It is used by the internal auditor to show what was examined, highlighting positives, negatives and conclusions, so that the company’s management knows what is going well and what needs to be improved.
The report should be carefully prepared. Yet it is at this point that many internal auditors fail.
The text needs to be clear, objective and impartial in order to ensure that the audit’s results are useful and the organization can use them as a guide to set the direction of actions.
PK Chopra is one of the leading management consultants who have been assisting clients across industries with flexible and result oriented solutions that enhance the organization’s performance by improving efficiency in the business processes.
PK Chopra offers the internal audit services / process audit services in India to the companies. If you wish to know more in this regard, kindly contact us.