Why Is An Internal Audit Necessary?
All we know about auditing is an assessment of a company’s performance especially the accounts of the company by a group of chartered accountants who are independent of the company. Meaning, auditors are the external people who don’t have any interest in the company. Before the external auditors evaluate the company’s accounts and performance, it is necessary that every company establish a department called the internal audit to exclusively carry out the operation which is performed by the external auditors to minimize the error and to put things in control.
So, an internal audit is the independent appraisal of the company’s performance carried by the internal audit department of the company. They evaluate and analyze the business operation and ensure whether the control system established is effective. They mainly focus on evaluating the performance of major departments such as the accounting, financial, legal and other major business departments.
Internal audit objectives
Internal audit must be carried out by every organization for the following objectives.
1) Control: The main purpose of conducting an internal audit is to keep proper control over the business. Proper control enhances the utmost efficiency in the organization. Exercising adequate control helps the organization to identify gaps and fix the issue immediately.
2) Accounting system: Evaluating the accounting system is the primary function of an internal audit department. The internal audit staffs conduct a proper check on the accounting transactions, books and ensure that accounting entries are authentic as per the applicable accounting standards. Regular check on the accounting transactions results in zero error.
3) Management: Internal audit helps in improving the business of the company. The internal auditor reports to the management in case of any business flaw that has a potential impact on the business growth. Timely identification of problems and reporting the same to the management could save the company from a huge risk.
4) Business review: Apart from the evaluation of accounts, the purpose of internal audit is to review the business operations and identify the business area that is performing poorly. Based on the review, the management takes the corrective measure for efficient working of the particular business division.
The reason for having an internal audit department is manifold. However, the overall purpose is to have all the internal controls and check in place. By monitoring the internal checks regularly, the system in the organization works effectively without less or no flaws. Internal control is an evaluation of a company’s performance at the outset. This is mainly performed by organization dealing with finance, trading, investment etc. Read more to know about the trading bots available in the market if you are interested in trading and expect to earn a considerable profit.