The main aim of setting up a business is to gain profits so that these could be further distributed to the investors and shareholders of the company. To achieve this profitability, the company must continuously check its various operations and processes. This complete and in-depth scrutiny of all the data generated by a business is termed as the audit of a business.
After hearing the term audit, many people get squeamish as they feel that an audit is just a waste of time and resources which could be put to better use. These people are very wrong as auditing is one of the essential processes for a company which will help the management of the company to plan for the future.
Two Types of Audits
In an external audit, the person or firm conducting the audit is the third party. It has no relation to the company. This type of audit is mostly performed for a company which is not huge and cannot afford to keep a separate department for auditing of the financial data of the company. After conducting the audit, the third party auditing firm will provide a certificate to the company that all the records are correct of the company. This certificate will be a significant factor in swaying the trust of the present and potential investors of the company.
Internal audit is a type of audit which is conducted by an auditing department within the company. Large organizations mostly use this type of audit as they have good financial backing and have operations of a higher level of complexity. The auditing department regularly checks these complex and sophisticated processes of the company. The internal auditors are responsible for various things such as fraud detection, legal and regulatory compliance, assessment of risk, control measures, etc.
The internal audit department acts as a, which will keep a stern eye at the various process and notify the management of any fraudulent activity happening in the company. It can also add value to the company by acting as a business consultant.
In this blog, we will be focussing on the internal audit and how can internal audit help a business.
Importance of Internal Audit
Performing an internal audit is essential to continually monitor and take a head count of all your assets. This audit helped the management to be in control of all the process at any given point in time. The audit will also analyze the problem and then provide a business solution for such a problem.
Here are the top reasons why an internal audit is so essential for a company:
1. Improves Efficiency of Processes
With a continues assessment of the various processes and procedures of the company, the management can drastically improve the efficiency and productivity of a company. The auditors will ensure that there is no fraudulent or illegal activity happening in the company and will also make sure that there is a judicious use of resources.
2. Provides Valuable Insights
In case there is a discrepancy in the report created by the accountant, the internal audit is done. The auditor will do an in-depth analysis of the process and will find out all the essential data about the process. This comprehensive analysis will allow the management to take steps for the future of the company.
3. Risk Assessment
Assessments at regular intervals will increase the control of the company and will also make the company more trustworthy. A periodic risk assessment and the publication of the resulting facts and figures will generate more trust among the shareholders and potential investors.
4. Ensure Compliance
The internal auditors will make sure that the company is conducting all its operations according to the regulations and laws stipulated by the concerned authorities. Ensuring the compliance of the business will not only provide you with the peace of mind but will also gain the clients' trust and will help the company to avoid the fines which are associated with the non-compliance.
5. Establish Control Functions
An internal audit will examine the various lines of credit allowed to the customers and will control the losses in the company. The audit will try to increase productivity in the least amount of resources possible. It will also take care that there is no loss occurring in the company due to any reason. The audit will keep a check of all the monitoring functions of the company and will test the related policies from time to time.
As time passes, businesses become more complex and require a sturdier internal audit process. The internal audit also has to grow alongside the company. This is the reason many companies need an internal audit department so that they can keep track of their process and ensure the growth of their company.
At JAXA, we offer both auditing services, which would suit the requirements of the business. We also offer various other services such as Tax related service, Vat Filing, and many more. For details on our offerings do, contact us - we’d be happy to help.