Things to keep in mind when conducting Internal Audit for the first time

The UAE is considered a hotspot for emerging businesses and provides ample opportunities for companies to achieve the next growth stage. As the companies evolve externally, the internal processes should strengthen to keep up with business growth. The internal process's strengthening involves the formulation of company operational processes and employing a check mechanism to keep it strong. The internal Audit plays a crucial role in finding the loopholes & gap for improvements and resolving them.

What is an Internal Audit?

Internal Audit is an inspection of the organisation's processes to identify any loopholes in a business's working cycle and resolve them accordingly. An internal audit's main objectives are to streamline the company's major business processes and make them efficient and effective without errors. 

The Internal Audit process involves scrutinising all the list of bank accounts, transactions receipts, general ledgers, payroll, trial balance, affirmation documents, legal and loan documents, past audit reports, etc. The end of the internal audit process produces a report which is used by the company's management. 

The Internal Audit uncovers any acts of negligence prevailing in the company's operations and other important functions. The Audit will bring the irregularities to the management's notice and permit the management to take remedial actions to resolve the same. There is no limitation to carry out the internal audits, and they can be scheduled every month, quarterly and even half-yearly to align with the company's goals. 

Importance of Internal Audit in an Organisation

There are many advantages of an internal audit in a company. Below are a few of the importance of internal audit in a company.

• Internal Audit always keeps a vigil on the company's accounting and finance activities.
• The Internal Audit process evaluates the company's internal controls, ensures regulatory compliance with all the state laws, ensures records finding & maintaining, and safeguards the company's assets. 
• The audit results in the company implementing the best possible measures in internal administration and risk management as per the Institute of Internal Auditors. 
• Internal audits can be instrumental for any external audit conducted in the company. The issues and amending slips issued by the internal audit team can help resolve the same, resulting in either no issues or fewer issues in external Audit. A good external audit score can increase the prestige of the company.  
• The External Audits generally centre around accounting and financial risk assessment, whereas the internal Audit has an extensive scope of duties and diverse reporting pre-requisites in the organisation. 

Steps Involved in Internal Audit

The following steps are involved in conducting the Internal Audit in an organisation:

• The in-house audit team plans the Internal Audit process & timelines.
• The respective department's management is notified of the audit plan and a list of required documents required to carry out the Audit.
• The Internal Audit team thoroughly reviews all the documents and records submitted. The department staff are interviewed if required by the audit team.
• A draft audit report is generated based on the Audit findings, which include any discrepancies in accounting and the processes, if any and sent to the department's management for comments.
• The management sends the required feedback to the findings of the draft audit report.
• The audit team review the final internal audit report, which is published and filed for future reference.
• The Internal audit team will follow up with the management to resolve all the audit findings if any.

Pre-requisites of an Internal Audit

There are certain things to keep in mind before conducting an internal audit in a company. The following are some of the pre-requisites of an internal audit in a company.

• The audit team has to plan and set a specific date and duration for the Audit. The respective department has to be informed in advance, and all the related staff should be present at the time of the Internal Audit.
• All the tax and bill receipts must be available for inspection to the Internal audit team. It is suggested to clear all the dues and account the same.
• All the books and records of the company must be updated whenever necessary and must be presented for inspection.
• The list of bank account statements, payroll records, all legal agreements and loan documents must be kept ready for the Audit.
• A clear deadline for the audit review set before the Audit to discuss the internal audit report's findings.

How Can We Help?

Jaxa Chartered Accountants are one of the leading auditors in the UAE, with offices all over the UAE. Our consultants assist companies to set up the accounting and audit processes based on good practices. We advise our clients in bookkeeping, accounting, auditing, and implementing the audits' findings. Please Contact Us for any queries on the internal Audit and related process. We'd be happy to help!