Internal Audit Function:
The Institute of Internal Auditors defines the Internal Audit Function “An independent, objective assurance and consulting activity designed to add value and improve an operation. It helps organisations accomplish its objectives by bringing a systematic disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” It has also stated that, “As a cornerstone of strong governance, internal audit function, bridges the gap between management and the board assesses the ethical climate and the effectiveness and efficiency of operations, and serves as an organization’s safety net for compliance with rules, regulations and overall best business practices.”
With the increasing use of modern technology, the auditing function has become even more valuable and important for a company. But still there are major challenges of Internal Auditing in future. In spite of this, it has so many benefits that serves the company with a lot of insight.
Benefits of having strong Internal Audit Function in the organization:
When an organisation faces challenges and requirements then a very successful Internal Audit Function becomes utterly important. It can provide with a number of benefits-
- It focuses on the risk management and design various internal control method to manage risk:
By directing efforts in the key risk areas of the organization, Internal auditors can leverage their skills and enhance the overall efficiency and effectivity of the auditing process. It also adds greater value to the business operations.
- It provides support to the Audit Committee and maintains interaction: When the objectives of internal audit and the audit committee are aligned with each other, this helps to unify the oversight. It also helps in efficient and effective allocation of the limited resources. It helps in identifying any new risks and provides the audit committee with relevant reports and the ongoing updates. It is an entrusted way to conduct reviews of higher level in a very strategic manner. Audit committees have a great advantage here as they gain more knowledge by developing and empowering a proper and successful internal audit function.
- The compliance requirements are enhanced: The business houses in order to get global capital have increased the organization’s geographical spread by crossing of political frontiers. This means that the compliance with the laws of the home country and other foreign countries is critically important for having a prosperous business abroad.
- It increases the size and complexity of business: When the size of the firm increases it dilutes direct oversight of the management on various operations and functions. This makes it essential to have a full time and independent team that can review the work and appraise the operations of the company with dedication.
- It provides with business models that are unconventional: Unconventional business models and module, for example, outsourcing accounting, payroll outsourcing, etc. are being used by most of the business houses. But assurance regarding the controls relating to the adequacy and effectivity of all these practices must be given to the organization. A business house can even use outsourcing the internal auditing function as a modern practice of the business module.
- The information technology is used intensively: The modern business enterprise is using Information technology in all spheres of operations and activities of a modern business either it be resource planning or data processing or online sales and e-commerce. The threat of data theft, hacking etc. have also increased immensely. The business houses are required to comply with the Information and Technology laws, cyber laws, etc.
- Helps in increasingly the competitive environment in the organization: A well-equipped and well-planned internal audit function helps in assisting the business to identify challenges and opportunities for improving the efficiency and effectiveness.
- To protect the investors, regulators also mandate stringent norms: Regulators, in order to protect the interests of all the investors, are applying mounting pressure and strict stringent norms. To check the compliance with the latest regulations all the requirements are to be independently assessed through the internal audit function.