What Advantages Does the Internal Audit Service Give to the Company?
The definition and functions of internal audit are given. The advantages that the company receives when creating a civil audit service are disclosed.
Concerning the objectives of the internal auditing consulting services, the International Standard on Auditing notes that they may vary depending on the scope, organization structure, and management requirements. The functions of the internal audit service of the company may include:
- Review of compliance with legislation. Internal auditors may be held responsible for verifying compliance with the law and other external requirements, as well as the requirements of policies and guidance from management and other domestic needs of the organization.
- Review operational activities. Internal auditors may be accountable for reviewing the economy, efficiency, and effectiveness of operations, including non-financial aspects of the organization.
- Risk management. Internal auditors can help the organization identify and assess significant risks and contribute to the improvement of risk management and internal control systems.
- Monitoring the internal control system. Internal auditors may be held responsible for reviewing controls, monitoring their functioning and issuing recommendations for their improvement.
- Corporate governance. Internal auditors can participate in the organizational governance process by doing auditing services in India like contributing to the achievement of the objectives of corporate ethics and values, managing performance, and accountability, communicating risk and control information to the relevant functions in the organization and establishing effective interaction between persons with managerial authority, external and internal auditors and management.
- Study of financial and operational information. Internal auditors may be held responsible for reviewing the tools used to identify, measure, classify and reflect financial and operational data, as well as for the detailed study of individual articles, including comprehensive testing of operations, balances, and processes.
Such factors determine the suitability of creating an internal audit service as the stage of the company's lifecycle, its scale, the degree of formalization of processes, the role of the owner in management.
In the early stages of the life cycle of the company, as a rule, the owners are directly involved in the management process, the processes are not formalized, their control is situational, full-fledged management and control systems are not developed.
In these conditions, the subject area of internal audit is very narrow:
- The guaranteeing function of the audit is not claimed by the owner - it receives information directly in the management process;
- An assessment of the success of internal control and risk management systems is impossible - they have not yet been established.
Thus, it is hardly advisable to create an appropriate service.
But as the company develops and diversifies, its size grows, the dimension and complexity of management tasks increase, the range of risks widens, formalization of natural processes occurs, decentralization and formalization of management, alignment of controls, risk management.
The assessment of risks and operational efficiency, monitoring of control systems, etc. are becoming topical. In these circumstances, internal audit becomes a handy management tool.