Internal means an independent service to assess the organisation’s internal controls system, its corporate practices, processes, and methods. An internal audit helps in ensuring good compliance with the various legal obligations applicable to an organisation. 

1. The purpose of an internal audit is to evaluate the effectiveness and operational measures framed by a management of organisation. An organisation may have a standard of rules for operations, such as placing orders, accepting deliveries, making payments and receiving payments. An internal audit also helps in knowing whether the employees follow the internal operational measures or not.

2. An internal audit helps in identifying deficiency or inability and taking necessary actions/steps to correct it.

Internal audits can identify any frauds by employees, such as misappropriation of funds.

3. An Internal audit can also identify whether there are deliberate cost overruns, whether a particular vendor is getting preference over other low-cost suppliers.

4. During the course of internal audit it helps the management to identify the requirement of employee’s rotation between different roles and duties. An internal audit can evaluate the potential threats or financial losses. An organisation can plug in financial leakage. The process enables to identify the deficiency and mitigate it within a due time before the statutory audit.

5. An internal audit can be done on annual or monthly or quarterly basis. The choice depends on the requirement of the organisation. In some cases, a company shall mandatorily appoint an internal auditor, as per law under the Companies Act, 2013. There are different types of evaluation or analysis techniques an internal auditor may adopt for performing an internal audit.

1. Identify the process and decide the Frequency of audit

Auditing of every single process cannot be a viable thing to do for businesses. We need to identify the specific areas whose audit is necessary to grow organisation in real terms. And the second thing is how often you conduct audits in your organisation is an important aspect of successful business. There might be some processes that require annual audit while some may require half-yearly or quarterly audits to ensure consistent results.

2. Planning the Process Audit

This step of planning and processing the audits is very crucial. Preparation of a plan and schedule in advance enables you to avoid the clashes of the processes and unavailability of the right team members required for the audit. A good audit plan helps your teams to plan their activities and work accordingly.

3. Notify the Departments

Inform all the departments about the upcoming audits in near future so that they can prepare with the necessary documents and other materials such as evidence for the action plans implemented for the auditor.

4. Prepare Checklist and Conducting the Audit.

Preparing the audit checklist is an important pre-audit step of auditors, but it is quite important to ensure that checklist must be industry specific. You can edit these checklist according to the practices and workflow of your organisation and execute the audit.

5. Record Audit Findings

The next step is recording the audit findings to understand the process of work and the required improvements. Audit findings are nothing but the Visions on the quality and consistency maintained within the organisation to ensure product/service quality.

o After recording the audit findings, you can perform study to identify the areas that need immediate vigilance versus the ones that can be reviewed and corrected after a while.

6. Preparation and Implementation of Action Plans

The reform areas identified in the audit findings shall be scrutinised to find and evaluate the root cause and prepare an action plan accordingly. The scrutiny and, preparation of action plan, and implementation of it depend on the severity of risk of the issues identified.No matter which technique you use for the root cause scrutinising, make sure you perform it efficiently since you cannot afford the repetitions of the quality issues that may lead to increased overhead expenses.

7. Follow-up on Issues or Improvements Found

It is last and important step as planning and performing the audits since it helps you to measure the degree of viability of an action plan. And following-up work like a reminder for the audit activities that required immediate attention.Ensure the best of your internal audit tool to make sure you are delivering your customers’ needs every time!

Conclusion

1. An internal audit can ensure that an organisation can secure timely compliance with law and regulations.

2. The audit provides a degree of safety and helps to manage risk and Prevention from fraud, abuse of power.

3. An internal auditor provides the management with their objective evaluation of the processes and accounts.

The management can improve their operational and financial performance using the services of an internal auditor.