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 that will help the management of the company to plan for the future.
Two Types of Audits
There are two different types of auditing of a business. The management should be clear as to which type of auditing will be more suitable for the business. The two types of auditing are given below:
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 that is not huge and cannot afford to keep a separate department for auditing 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 the company. This certificate will be a significant factor in swaying the trust of the present and potential investors of the company.
An internal audit is a type of audit that 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 on 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.
Roles and Responsibilities of Internal Auditor
There are certain roles and responsibilities which have to be performed by an internal auditor. These include the following:
Examine and Analyze all the financial information of the company
The first and foremost responsibility of the Internal Auditor is to provide relevant and accurate financial information about the company and then analyze this information to further simplify it. This will assist the management to fully understand the current trend of the business so that it can compete with the competitors in the market.
Provide objective insights to the Company as well as the Investors
The information analyzed by the business will help both the management as well as the investors, both current and potential. As the internal auditor’s auditor is not affiliated with any organization or has no ulterior motives, the information provided by the auditor in the audit report will be accurate based on which both the auditor as well as the investors can make an informed decision.
Examine if the company is Compliant
Compliance plays a very important part for the companies in the present business environment. The majority of the governments are making more laws and are making sure that the businesses stay compliant with the rules and regulations of the jurisdiction. The Internal Auditor will lay out all the rules and regulations to be followed by the business.
Assess and, if need be, alter the various functions of the business
As the internal auditor will be analyzing all the reports prepared by the accountant, the internal auditor will be in a better position to understand the current financial scenario and if any more business operation needs to be done. The auditor will also be able to decide if all the business operations are necessary for the business.
Prepare a future plan for the business
Every business has the intention of sustaining for the longest period of time possible. This is why the business needs to constantly review the various financial information of the company. This will allow the management to prepare plans for the future of the business. This will also allow making changes in the future business plans if any deviation from the estimated trends has occurred or in case of any unforeseen situation.
The above are some of the Roles and Responsibilities of an internal auditor of a company. If the internal auditor does not perform the audit diligently, then the business can suffer the consequences. This is why it is suggested that the management of a company should choose expert and professional Auditors who can take care of the company.
Importance of Internal Audit
Performing an internal audit is essential to continually monitor and take a headcount 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:
Improves Efficiency of Processes
With a continuous 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 judicious use of resources. This will greatly improve the profitability of the company.
Provides Valuable Insights
In case there is a discrepancy in the report created by the accountant, the internal audit is performed to remove any doubts. The auditor will do an in-depth analysis of the process and will find out all the essential data about the company. This comprehensive analysis will allow the management to take steps for the future of the company.
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.
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 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.
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.
If you are looking for Internal Audit services in the United Arab Emirates, then you can have a look at the services provided by JAXA Chartered Accountants. The experts at JAXA also provide various other services which will help in the growth and development of the business. The services include Auditing services, Accounting Services, VAT and Tax related Services, and many more. For more details about the services, feel free to Contact Us. We will be happy to help.