What is Internal Audit?

Internal auditing is a continuous process of appraisal of an organisation's operations and evaluation and monitoring of risk management, reporting, and control practices. It is an independent and objective oriented assurance and consulting activity designed to add value and improve an organization's operations.

Need for Internal Audit 

1.  Increased size and complexity of businesses 
2.  Enhanced compliance requirements 
3.  Focus on risk management - understand risk exposure and internal controls to manage such risks
4.  Intensive use of information technology 
5.  Need to create greater transparency, establish sound corporate governance

Characteristics of Internal Audit

1.  Internal auditor should be independent which permits them to render impartial and unbiased judgment essential to the proper conduct of audits 
2.  Internal audit is a management function  
3.  It contributes in accomplishment of objectives and goals of the organization through ethical and effective governance 
4.  Internal audit function constitutes a separate component of internal control with the objective of determining whether other internal controls are well designed and properly operated 
5.  Focus is towards improving the internal control structure and promoting better corporate governance 
6.  Risk management and internal control are two sides of the same coin. Risk management focuses on the identification of threats and opportunities, and controls are designed to effectively counter threats and take advantage of opportunities 

Functions of Internal Auditor 

1.  Review operations, policies, and procedures and assist management in establishing better policies and procedures
2.  Provide assurance on risks that they are being managed within the acceptable limits as laid down by the Board of Directors
3.  Examine the continued effectiveness of the internal control system through evaluation and make recommendations, if any, for improving that effectiveness
4.  Help the management to fulfill its responsibilities relating to prevention and detection of fraud to the extent practicable Statutory Mandates

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