Internal Audit : an independent service to evaluate an organisation's.ppt

An internal audit is an independent and objective evaluation of an organization's internal controls, corporate governance, and accounting processes. The goal of internal auditing is to help an organization improve its operations and accomplish its objectives. Internal audits can help ensure compliance with laws and regulations, maintain accurate financial reporting, and identify problems before they are discovered in an external audit.

1. Learning Objective
•Definition of Internal Audit
•Objectives of internal audit
•Importance of internal Audit

2. Internal Audits: USA (IIA) “Internal Auditing is an independent and objective
assurance and consulting activity designed to add value and improve
organizations operations. It helps an organization accomplish its objectives
by brining a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control and government process.” We
got the following essential aspects from the above definition.
•Independent objective activity.
•Assurance and consulting
•Adding value
•organizational objectives
•Systematic and Disciplined approach
•Risk Management control and governance process.
IIA further states that internet audit activities are performed by Persons within or
outside the organization. Finally we can say that, “Internal audit is the
independent appraisal of activity within an organization for the review of
accounting, financial and other business practices as a protective and
constructive arm of management. It is a type of control which functions by
measuring and evaluating the effectiveness of other types of control”.

3. Objectives of Internal Auditing
•Reviewing and apprising the soundness, adequacy
and application of accounting financial and operating
controls.
•Ascertaining the extent of compliance with
established policies, plans and procedures.
•Ascertaining the extent to which company assets
accounted for and safeguarded from bases of all
kinds.
•Ascertaining the reliability of accounting and other
data developed within the organization.
•Appraising the quality of performance in caring out
assigned responsibilities.

4. Scope of Internal Auditing:
•(1) Risk management and control (2) governance.
•Risk management & control: The internal audit
activity should assist the organization by identifying
and evaluating significant exposures to risk and
contributing to the improvement of risk management
and control systems. This involves evaluation of the
following.
•(i) Reliability and integrity of financial and
operational information: It means used to identify
measure classify and report such information. This
involves an examination to ascertain whether-
•Financial and operating records and reports
contain accurate, reliable timely complete
and useful information.
•Control over record keeping and reporting is
adequate and effective.

5. (ii) Compliance with laws Regulations and contracts:Internal auditors
should review the systems
established to ensure compliance with those laws contract, policies, plans and
Procedures which could have significant impact on operations and reports and
should determine whether the organization has compliance with there or not the cost
of compliance with legal and regulatory requirements can be optimized through
proper systems.
(iii) Safeguarding assets: Internal auditors show review the means of
safeguarding assets and as appropriate verify the existence of such assets.
(iii) Effectiveness and efficiency of operations: Internal auditors should
appraise the economy and efficiency with which resources are employed.
Audits related to economical and efficient use of resources should identify
such condition as under utilized facilities non-productive work procedures
which are not justified on cost benefit considerations and overstaffing.
(vi) Accomplishment of objectives and goals for operations or
Programmes:
Internal auditors should review the operations or programme to ascertain
whether result are consistent with established objectives and goals for
operations or Programmes are being carried out as planned.

6. Governance: The internal audit should evaluate and make
recommendations for improving the governance process for
achieving the following objectives-
(a) Promoting appropriate ethics and values within the
organization.
(b) Ensuring effective organizational performance management
and accountability.
(c) Effectively communicating risk and control information to
appropriate areas of the organization.
(d) Effectively coordinating the activities and communicating
information among the board, External and internal auditors and
managements.
The modern concept of internal auditing covers not only the
traditional functions dealing with a of custodianship and safe-
guarding of assets compliance with policies and reliability of
accounting information, but it also emphasizes new areas like
reviewing the economical and efficient use of resources and
organizational performance.

7. Forward Looking Approach to Internal Auditing:
•1. Evaluation of internal control: This should test
the adequacy of accounting system from the
following view points :
•Information is adequate and accurate ; Resources
of business ; Projected against losses resulting
from-
•2. Review of accounting Efficiency: This should
cover the following aspects:
•Procedures and effectiveness, Space is fully
utilized; Personal is adequate.
•3. Appraisal of performance of organization:
Aspect to be covered include the following
•implementation of policies ; Compliance with
Procedures ;Review of individual performance.

8. Basic Point Internal auditor External Auditor
Appointment Appointedbymanagement Appointed by
shareholders
2.Nature Heisanemployeeofcompany Heisanoutsider
3.MajorconcernServing the needs of
management
complianceofstatutory
requirements
4.Basicjob Reviewofoperationsandinternal
controlsfordevelopment
improvementsandensuring
complianceofpoliciesand
procedures
Expressionof an
independentopinionon
financialstatements.
5.ScopeofworkDeterminedbymanagement Determinedbystatus
Difference between Internal Auditor and External Auditor

9. Thank
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