INTERNAL AUDIT

1.Meaning:
 Internal auditing is an independent, objective assurance and consulting
activity designed to add value and improve an organization’s operations. It
helps an organization accomplish its objectivity by bringing a systematic
,disciplined approach to evaluate and improve the effectiveness of risk
management ,control and governance processes.

 Internal audits evaluate a company’s internal controls, including

its corporate governance and accounting processes. They ensure
compliance with laws and regulations and help to maintain accurate and
timely financial reporting and data collection.
2.APPLICABILITY OF INTERNAL AUDIT
 3.OBJECTIVES OF INTERNAL AUDITING

 To analyze the existing system of internal control and suggests improvements in

this system.
 To operate an effective system of internal audit as an important function of the
control activities.
 To correct and detect inefficient operations and weak points. Based on this, to
recommend changes.
 To verify mainly the accuracy, integrity and reliability of the financial and other
records.
 To ascertain whether the organization adheres to the standard accounting
practices and the properly established methods of accounting.
 To take up an investigation at the special request of management
 To facilitate the early detection and prevention of frauds.

4.FUNCTIONS OF INTERNAL AUDIT

1. Monitoring and internal control

2. Examination of financials and operating information
3. Review of the economic efficiency and effectiveness of operations
4. Review of compliance of laws, regulations and other external requests.
5. Special investigation into particular areas.
 Who can be internal auditor?
 A Chartered Accountant; or
 A Cost Accountant; or
 Any other professional as may be decided by the Board of Directors.

TYPES OF INTERNAL AUDIT

 Compliance Audits
 Environmental Audits
 Information Technology Audits
 Operational Audits
 Performance Audits
 INTERNAL AUDIT PROCEDURE/PROCESS
 Planning
 Fieldwork
 Reporting
 Follow-up
What is the Internal Audit Procedure / Process?

 Planning

• Background Review (authoritative references, contractual requirements,

budgetary information, policy and procedure review, process mapping, and risk
& control assessment)

• Entrance Conference

• Work Program Development

 Fieldwork

• Work Program Execution

• Testing of controls

 Report Writing

• Draft and Approval

• Exit Conference

• Management Response (20 working days)

• Final Report Issuance w/ Management Response

 Follow Up (6 month intervals)

• Corrective Action Status Updates

• Verification

• Status Report Issued