The Benefits of Internal Audit
Internal audit has a vital role in improving the performance of a company. Internal auditors help companies in the identification of key risk factors. By doing so, the company is able to foresee or expect potential future concerns and identify their current weaknesses. Internal audit services help a company identify processes and controls that are not working effectively. They help companies have an opportunity to improve them.
What is an internal audit?
The role of an internal audit is to give assurance that the business’s risk management, internal control and governance processes are working effectively. Internal auditors should be independent of the operations that they are evaluating and report to the highest level of management in the company like the senior managers, audit committee or Board of Directors.
Internal auditors work with a company’s management team to review systems and operations. These audits help identify how well risks are being managed. And assess if the right processes are in place and if procedures are being properly followed. Internal auditors assess and evaluate the controls of the company. They help identify areas that may be improved and suggest procedures that may be done more efficiently.
What are the benefits of internal audit for a company?
Internal audits assist management in improving internal controls by identifying weaknesses in the systems and provide opportunities to correct these weaknesses. Internal auditor usually deals with issues relevant to the continued existence and prosperity of a company. Audits are done through a combination of consulting and assurance. The assurance part involves informing directors and managers on how the systems in place are working. The consultation then takes place on how these systems and processes in place can be improved where needed or necessary.
Internal audit also provides senior management and directors with the assurance that help them in fulfilling their responsibilities to the stakeholders and the business. It helps show to shareholders and other stakeholders that the company is managed effectively on their behalf. This is made through the evaluation of important risks and highlighting facets where improvements are needed or necessary.
What is the difference between external and internal auditors?
Internal auditors report to the Board of Directors and senior management of the company, while external auditors report to stakeholders or shareholders outside of the company’s governing body.
Internal auditors evaluate and recommend ways on how to improve the effectiveness of the control processes of a company. They are usually company employees. For companies which do not have internal audit functions, they have the option to hire or employ professional internal auditors to do internal audit.
Internal auditors can examine and evaluate issues related to the business practices and risks that a company is faced with, while external auditors evaluate and examine financial records and issues opinions or reports about the financial statements of the company. External auditors usually work for independent audit firms. They are usually appointed by a shareholder vote and are accountable to the shareholders.
Internal auditors offer assurance on whether the risk management governance and internal control processes of a company are operating effectively through the evaluation and recommendation of ways on how to improve the effectiveness of these control processes. They report to senior management and Board of Directors and are accountable for the management of the company. This process help management in improving controls and show stakeholders and shareholders that the company is managed effectively.
Benefit of Audit in General
Fraud can be checked and deterred by regular audits. Risk of errors and irregularities that occur may also be minimised with business audits.
- Audits help in the identification of weaknesses in accounting systems and help suggest improvements.
- Audits assure directors not involved in accounting that the business is running in accordance with the information they are receiving and help reduce poor accounting and fraud.
- Audits provide advice that can have real financial benefits for a business.
- Audit enhances the reliability and credibility of the numbers being submitted to prospective buyers.
- Audits add credibility to any published information for investors, employees, suppliers, customers and tax authorities.
- Internal audit offers assurance to shareholders that the figures in the financial statements show a fair and true view of the financial status of the organisation or company.
Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit, and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.
Call our Melbourne team today on 03 9088 2242, or email us via audit@kingstonknightaudit.com.au.
