Internal audit is an independent consulting activity designed to improve an organization’s performance. The process helps a firm accomplish its predetermined objectives by setting up a systematic, disciplined approach to evaluate and improve the efficiency of its operations. Internal audit activity increases the effectiveness of the company's risk management, control, and governance processes.
An internal audit report helps to recognize areas where corrections or innovations might be made. An internal auditor work across the department of the firm to identify and analyze the control process. Along with finance and IT, an auditor reviews the company’s supply chain, inventory and other cultural and ethical aspects.
Need for Internal Audit in Dubai
Dubai is one of the promising commercial and trading hubs – a premier global city and preferred destination for entrepreneurs and investors the world over. Nevertheless, the government of Dubai is very particular about the rules and regulations of the land. The number of audit firms has been increasing due to the mandatory norms instituted by the government. Over the years, audit firms in Dubai have been playing a supporting role in the progress of the economy. So, an internal audit not only helps an organization to identify errors but also plays a major role in the following ways:
- An internal audit helps to verify company assets and recommend proper security measures for their protection
- It evaluates the adequacy and effectiveness of the internal control system
- It assesses the firm’s compliance with audit policies and procedures
- It reviews operations to evaluate whether results are matching with the predetermined objectives and are being carried out as planned
- It investigates company reports for any fraud, theft or misconduct
Objectives of Internal Audit
- To maintain proper control over the business activities
- To evaluate the accounting and internal control system
- To detect and provide fair and error-free financial report
- To protect the assets and determine the liabilities of the firm
- To detect frauds and provide necessary suggestions
- To ensure whether the organization is in line with standard auditing and accounting practices and procedures
Internal Audit Procedure
1. Operating environment
A certified internal auditor evaluates how a company operates by interviewing departmental employees, accounting managers, external auditors, and risk specialists. An organization’s operating environment describes the management’s leadership style, ethics, and business practices. The auditor may also look at industry trends and regulations to determine the organization’s operational efficiency.
2. Review Controls
An internal auditor reviews past audit reports or working papers to determine how a company’s internal control system operates. He/she also inquires the employees who work on the control system to check the adequacy of the internal control system. A certified auditor applies auditing standards and his expert knowledge to detect procedures, tools, and methodologies that build controls.
3. Test Controls
An audit firm test an organization’s controls, policies, and procedures to ensure that such controls are perfectly designed and are operating effectively. The firm must possess a control system that provides detailed procedures and guidelines for a better decision-making process.
4. Account Balances and Details
An internal auditor examines account balances to determine whether such statements are in line with accounting standards and regulatory mandates. He/she also tests account balances to check the completeness and fairness of financial reports. A complete report includes a balance sheet, cash flow statement, profit and loss account and a statement of the stockholder’s equity. The account details are examined to identify any material misstatements in the report. Here, a misstatement could result from intentional fraud, human errors or technology system weaknesses.
Internal audit plays a major role in improving the efficiency and effectiveness of the company’s processes. So, if you are new to audit and accounting procedures of the business milieu, it is advisable to get the necessary information from the audit firms in Dubai. We at Jaxa assist our clients in conducting an internal audit and preparing a structured internal audit plan. For further details on internal audit services in Dubai, contact us – we'd be glad to assist.