Internal Audit Service

Audit and risk Advisory

Internal Audit Service in India

Internal Audit:

Audits conducted or organized by the management of a business organization for ensuring and analysing the efficacy of the business operations is called an internal audit. It is one of the main and important functions of the management.

Internal Audit is done for checking the financial health of the organization. It is regulated and governed by the Companies Act, 2013 that prescribes and provide certain provisions for conducting the Internal Audit Function in an organization in India.

What is need for conducting Internal Audit?

A need for checking the risk management and internal control is required by every company for improving the condition of the management and to analyze the financial position in the competitive business world. Internal audits are needed for following purposes:

  • For managing the risks in the organization and taking necessary control measures to eliminate or eradicate them.
  • For enhancing the compliance of the company with the relevant provisions and laws.
  • For creating a transparency in the governance and management.
  • To focus on the risk management process for understanding all the possible risks that an entity has exposure to.
  • For checking the intensive use of the information and technology in the company.
  • For checking the complexities in the business.
  • To establish a proper, efficient and sound corporate governance.
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What are different types of Audits under Internal Audit?

There are certain types of audits that are related and covered under the Internal Audit function. These have been inseparable and must be conducted in order to get maximum benefits of the Internal Audit. These audits are as follows-

What are different types of Audits under Internal Audit?

There are certain types of audits that are related and covered under the Internal Audit function. These have been inseparable and must be conducted in order to get maximum benefits of the Internal Audit. These audits are as follows-

Operation Audit

The areas covered while performing an operational audit are evaluating the sufficiency of the operative internal controls, checking the compliance of the business activities with the regulations, internal policies and industry standards and, ensuring the efficiency and consistency of the procedures and processes in the company.

Accounting and Financial Reporting Audit

While conducting an Internal Audit, it has to be aligned with the financial reporting and the accounting function of the organization. This audit covers, essential checking of the financial statements, books of accounts and related reports. It is performed to provide the shareholders an assurance that all the profits and losses and other transactions shown by the company are true and fair.

Performance Audit

This type of Internal Audit is conducted in order to check the performance of the company in accordance with the set objectives and aims of the organization. A proper evaluation of the actual performance and working of the company is to be ensured.

Information Technology Audit

The Information Technology Audit or as it is popularly known IT Audit are conducted for a complete assessment of the information system used by the company, its accuracy and to check whether it is operating securely or not. Also, these are done to ensure the compliance with the mandated provisions and regulations.

What is the Process involved in Internal Audit Function?

The process involved in the internal audit function has the following essential steps-

  • The auditor is required to establish and communicate the scope and the objectives of the internal audit to all the members in the management.
  • Reviewing and understanding the complex key areas of the business is to be undertaken by the auditor. This is done by conducting in-person interview with the members or by reviewing the necessary documents.
  • Keeping within the limits of the scope of the internal audit the auditor has to describe all the key risks that the business is facing.
  • Then the auditor must ensure that the used internal control methods are ethical and efficiently combating and countering the involved risks.
  • With the help of the samples that are risk based, the auditor with the help must test the controls of the management in order to ensure there performance as per estimation.
  • Next, the auditor has to report all the problems and issues, so that the management can address them. Also, they have to identify any upcoming challenges in the business and then collectively with the management must negotiate potential plans for these concerned aspects.
  • A finalized report or an internal audit report is to be prepared by the auditor to express their viewpoint.

Internal Auditors:

A trained and skilled professional that is employed or appointed by a company for providing a complete evaluation of the business operations, corporate governance process and the financial objectives of the organization is called an Internal Auditor. An Internal Auditor works independently without any prejudices. Since the business world is continuously changing and upgrading therefore there is a need for continuous improvement in the core competencies of today’s internal auditors must also be ensured.

What are the Duties of Internal Auditor?

The key responsibilities of an internal auditor include the following:

  • Objectively assess a company’s IT and/or business processes
  • Investigating any fraud transactions and forgery in the company.
  • Has to provide safeguards for assurance.
  • To ensure compliance of the organization with the prescribed statutes and relevant provisions.
  • To identify the gaps and the shortcomings in all the processes of the entity.
  • It is the duty of the internal auditor to help the company in identifying improper conduct and behavior and promote the ethical environment.
  • To communicate all the findings and provide with their viewpoints and recommendations.
  • Evaluating the internal control measures and make necessary recommendations for improving them in order to make them more efficient and effective.
  • Providing a qualified or unqualified or disclaim or adverse opinion that is independent.
  • Assessing the risks in the company and the efficiency of the risk management process.

Internal Audit report:

Once the Internal Audit is concluded, the internal auditors have to analyze and interpret all their findings while conducting the audit. They have to summarize these in a report along with their viewpoint and recommendations or even any action plans that can be fruitful for the company. This report is called an Internal Audit Report which has to be provided to the management of the company.

What areas are normally covered under Internal Audit Service?

Internal Audit is also called as Management Audit because it is conducted on behest of management of the company. Here, focus is completely different than that of Tax Audit or Statutory Audit.

Normally, following areas are covered under Internal Audit Services:

  • Review of systems and procedures applicable to the organization and provide suggestions for improving them.
  • Review of adequacy and effectiveness of Internal Controls.
  • Physical examination and verification of stock, tangible assets and cash treasury.
  • Examination of internal policies/ guidelines prescribed by the management for the company, its compliance and reporting of variances if any.
  • Review of all statutory and legal compliance applicable in case of branch and reporting of deficiency, if any.
  • Review of adherence to standard auditing procedures and reporting its deviation, if any.
  • An Internal Audit Checklist provided by the head office.

What are the benefits of availing Internal Audit Service?

Since the business world is getting more and more competitive, it has become significantly more valuable and important that the business firms get all the aspects and key areas of the entity evaluated in order to be updated at all times. Conduction of an internal audit ensures that it is achieved. Following are the possible benefits of availing Internal Audit Services:

  • The company is provided with objective assurance.
  • A disciplined approach is brought to the operation and the work of the organization.
  • It provides with key recommendations and suggestion for bringing important changes that improvise the operations of the business entity.
  • Also, it helps the organization with accomplishing all its set objectives and goals.
  • It improvises the governance process in the corporate.
  • A detailed insight of the business module of the company is being provided.
  • It introduces a systematic approach for the managing the risk and the internal control measures.
  • It helps in improvising the efficiency and effectivity of the risk management and control methods used internally.
  • The senior management is provided with valuable insights.
  • For detection of any fraudulent operations in the internal and upper levels of the firm.

What are the areas covered in Internal Audit function?

Corporate Governance

It means the policies, rules or regulations, procedures and processes that a business enterprise uses to operate and direct the business activities for achieving its goals and to protect the interests of its members and shareholders. In the internal audit function, the auditors help the management to get an insight of the key areas and how to work more responsibly.

Risk Management

The effectiveness of the management of the involved risks is ensured by the auditor. Here the monitoring and evaluating the strategic risks is to be done. Also, the financial risks have to be given preference as the growth of the business is depended on the monetary profits or losses at core inclusive of other factors as well. This helps in the betterment of the operations of the company.

Internal Controls

The primary objective of conducting the audit is to evaluate the internal control methods used by the entity. These controls protect the company from frauds, forgeries or any major downfall. Therefore, there effectivity is ensured here.

How can we help as Internal Audit Consultants?

Typically, internal audit consultants have to review the procedures in the department and also observe the employees and there working. Though they are not responsible in the managerial or decision-making process of the department or the organization, they still have to provide with suggestions and advisory on making changes that helps in improving the operations of the department. They work closely with the managers of various departments to assist with the training part of the employees.

Our Approach on Internal Audit Consultants and Services:

We, Ezybiz India Consulting LLP, as a trusted Internal Audit Consultants help our clientele with number of services under internal auditing function. The services included are as follows:

  • Analysis of present internal control processes and its effectiveness.
  • Analysis of various policy documents available and suggesting changes or implementation of new policy documents.
  • Evaluation of the corporate governance structure.
  • Development of plans for the company based on risks.
  • Designing tools for cost effectiveness and cost reduction
  • Understanding various processes and giving suggestions for improvement
  • Assisting the staff to chisel their functional and mental skills for higher productivity and unpredictable efficient results.
  • Advising the clients on all the key activities and core operations that are important and are reliable to the operations of the business.
  • Developing measures of internal controls that are workable and enhance the controlling environment of the company.
  • Advising the management about the risk involved in the operational field and hence improves the risk controlling management.

EZYBIZ India Consulting LLP use a global approach for providing the best outsourced internal audit services. A highly efficient and effective internal audit service assures the organization in compliance with the regulations and law. It also helps in upgrading the quality of the management and the managerial staff and thus helps the business to follow methods that are more goal-oriented. Our professional team is highly experienced and skilled, that provides the business with core insights during different stages of the auditing function.

  • Section 138 of Companies Act 2013 read with Rule 13 of Companies (Account) Rules 2014 covers the situations in which Internal Audit is mandatory for any company.
  • In case of Listed Companies– Always Mandatory
  • In case of unlisted Public Companies – Applicable when either Turnover is more than Rs 200 crores or outstanding loans or borrowings exceed Rs 100 crore or Paid up share capital of Rs 50 crores or more or outstanding deposits of Rs 25 crore or more during preceding financial year
  • In case of Private Limited Companies– Applicable when either Turnover is more than Rs 200 crores or outstanding loans or borrowings exceed Rs 100 crore.
  • Section 177 of the Companies Act, 2013: It states on how the audit committee is to be formed or constituted in an organization.
  • Clause 49 of the listing agreement to the Indian Stock Exchange: This clause has been included and formulated for improving the governance function in the corporate sector.
  • Internal Auditor can either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.
  • Internal auditor may or may not be an employee of the company.
  • CAs and Cost Accountants can be both i.e  either engaged in practice or not

Internal audits must be conducted by the organization’s management at regular intervals for having the below-mentioned fair advantages-

  • For promoting a better and more efficient corporate governance management.
  • For focusing on improving the internal control system of the company.
  • To help in determining the efficiency and effectivity of the internal control measures.
  • For identifying the risks and opportunities on time. Then, helping in designing the methods of internal control for effectively tackling and countering the risks and properly taking the advantages of the opportunities.
  • For accomplishing the aims and objectives through an efficient governance process in the organization.

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