Internal Audit is an important function of the organization. It can be defined as an evaluation process for checking the procedures and processes used in the company. It is a tool through which the performance of the company can be examined thoroughly. The objectives of internal audit may vary from organization to organization depending on the nature of the business operations carried out by them. But its main functions include evaluating the corporate governance, risk management, and internal controls in the company. In the article, we will be discussing about the various advantages and benefits of internal audit that an entity can take.
Following are the benefits of an internal audit conducted in an organization-
- Betterment of management: Internal Audit can ensure the management of the business firm gets better and improves by pointing out all the weaknesses and errors that must be corrected for a successful business.
- Establishing an effective control system: One of the main benefits of an internal audit that an organization can reap is to establish a control system over the business that is efficient and effective. Effective control is an important function of the management to remove difficulties for the smooth working of the business.
- Division of work: To apply the division of work and labor, internal audit is a must. It is important for observing the work and activity of the employees and members of the company. Internal auditors can recommend certain ways through which the performance can be enhanced.
- Proper accounting system: Another benefit of an internal audit is that it helps in introducing an accounting system that is appropriate for the company. It can help in improving the transaction facility and maintain proper financial statements and records.
- Fixing the responsibility of the members: Internal audits can help in setting and realizing the responsibilities of the employees and members of the organization. Through an establishment of performance standards the internal auditor can evaluate the performance of all the employees.
- Judicial use of resources: Whether the resources available to the company are being utilized judicially or not is determined through conducting the internal audit function. Any misuse or wastage of the resources must also be checked. Making a plan for optimal utilization of resources is also a benefit of internal audit.
- Performance improvement: The internal auditor always comes handy and helpful in improving the performance of all the members and employees in the entity. By examining the organization’s previous year performance and achievement for improvisation.
- Recognizing the errors and frauds: The benefits of internal audits for the organization also include examining and recognizing any fraud or forgery that might have occurred in the records and accounts. It can be helpful in the rectification of all such errors.
- Protection of assets: Another major benefit of an internal audit is that it can protect the assets owned by the entity. It keeps a check on the utilization of the assets by the management and whether it has been used for business or private purposes.
- Review of the progress: The progress of the company can be reviewed by conducting the audit. For this the auditor compares the figures and numbers attained in the previous years with those of the current financial year. The performance of the entity as a whole is evaluated.
- Proper investigation procedure: A major benefit of an internal audit is that it helps in investigating any matters concerning the business operations.
- Beneficial for external auditors: All the work that has been done during the internal audit comes handy for the external auditors. The findings of the audit can help them in conducting the next audit by giving a direction.