The Essence of Internal Audit: Features and Significance for a Business

Each company sooner or later faces difficulties such as tax fines, misappropriation of resources, or clear employee fraud.

As a rule, the management does not find out about this immediately. And when it notices a leak of funds, the managers cannot always react quickly due to a lack of the necessary information.

It is the task of the best audit firms in Delhi to identify and prevent such risks in time. What is the essence of internal audit, what replacement is needed in the organization, and what are the pros and cons of this activity – learn from the article below? 

The essence and significance of internal audit

The concept of internal audit and internal control appeared back in the 18th century but was finally formed only in the 20th century. (Read More: Manage Your Business Well with Accounting Consultancy)

At first, internal audit was only responsible for risk analysis related to financial reporting and taxation. But with the globalization of the economy and the growth of the number of large organizations, the tasks of internal audit have expanded greatly.

It now covers all aspects of enterprise operations and evaluates both the strengths and weaknesses of the business. Internal audit is an independent analysis of the activities of an organization that protects the interests of the owner from the consequences of fraudulent schemes and illegal transactions.

It’s like a business x-ray that diagnoses an organization’s financial health and risk tolerance. The main task of an internal audit is to preserve the company’s resources, to identify inconsistencies or intentional misstatement of financial statements.

Eliminate many risks: financial, personnel, fiscal, informational, etc. And provide the management with reliable information about the work of the enterprise for making management decisions.

The essence of an internal audit can be described in 2 components: guarantees of an objective assessment and management consultation.

Although the objectives of the audit can change during the company’s activities, the main role of an internal audit is to protect the business from bankruptcy.

Who is engaged in an internal audit?

Internal audits can be conducted by both employees of the company and top audit firms in Delhi. But more often, the subjects of internal audit are staff members from the internal audit department, internal control, or the control and audit group.

These services report directly to senior management or to the founders (shareholders and owners) to ensure the independence of audits.

The objects of internal audit are often:

• Reliability of accounting and financial reporting
• Timely payment of taxes
• Enterprise assets and their sources
• Own working capital of the enterprise
• The work of the economic, technical and information services of the enterprise
• Design and estimate documentation and software
• Organization of production and business processes
• Compliance with laws, regulations, and accounting policies
• Checking the operation of all links of the control system
• Compliance with the principles of corporate governance, labour organization and much more

Information collected by audit firms in Delhi becomes an essential basis for making management and personnel decisions.

Internal audit is especially necessary for a company if owners do not personally manage

people and processes but delegate their functions to hired managers and want to be aware of what is happening.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by

CA Aman Aggarwal

AKGVG & Associates