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Internal Audit
Internal audit means testing of controls, processes, procedures and activities of the organization with regard to the particular function in order to add value and improve an organization’s operations. It helps to evaluate and improve the effectiveness of risk management, control and governance processes of the Organisation. The internal auditor furnishes analysis, appraisals, recommendations, counsel and information concerning the activities reviewed and accordingly suggests ways for reducing costs, enhancing revenues, and improving profits.
Advantages of Internal Audit:
- Better management: Internal audit helps to detect errors and frauds and provides suggestions to improve them which helps the management to take corrective action.
- Reduce cost: Internal audit detects the misuse of resources in time which helps to reduce unnecessary expenses.
- Proper maintenance of books of accounts: Internal audit checks the books of accounts, detects errors and frauds and helps in its correction which makes the act of final auditor easier
- Keeps a check on Staff: Since the work of the staff is checked by the internal auditor, it keeps a check on the performance of the staff and thus improves their efficiency.
- Early detection of frauds and errors: Since internal audit function is a regular activity, it leads to early detection of frauds and errors, thus enabling early corrective action by the management.
Procedure
Understanding internal controls and other records of the organisation
Review of the internal controls and other records of the organisation.
Discussion of queries and observations with the management and TCWG.
Preparation and handing over the Internal Audit report to the Management for corrective actions.
FAQ’s
1. Who all are required to get the Internal audit done?
– In order to mitigate the fraud risks and other coherent risks, it is advisable for all the entities to have a commensurate Internal Audit function. However, as per the provisions of the Companies Act, 2013, following companies shall compulsorily required to appoint an Internal Audit:
| Particulars | Listed Companies | Unlisted Public Company | Private Company |
| Paid up share Capital |
No limit |
Exceeding Rs. 50 crores |
–NA– |
| Turnover |
No limit |
Exceeding Rs. 200 crores |
Exceeding Rs. 200 crores |
| Outstanding loans and borrowings |
No limit |
Exceeding Rs. 100 crores |
Exceeding Rs. 100 crores |
| Outstanding deposits from public |
No limit |
Exceeding Rs. 25 crores |
–NA– |
2. Who all can be appointed as an Internal auditor?
– It can either be a CA, or a Cost Accountant, or such other professional having requisite knowledge and skills.