Ways in Which Internal Audit Will Give Added Value to the Business
Have you ever thought of how internal auditing is a value-adding component to an organization? You might know that internal audit is conducted by the internal bodies of an organization to verify the accuracy of business control procedures, governance structure, risk management and overall operations system, hence contributing towards improved business performance. Ultimately, its focus revolves around strengthening the internal control system and maintaining stringent checkup upon accounting records. Internal audit is performed with an in-depth understanding of the business culture and systems. The internal audit helps to mitigate the risks with effective and efficient control procedures. Communicating opinions with clarity and accuracy are the primary concerns of internal auditors.
Setting up control procedures
Internal Audit helps to establish a system that keeps the business operations in control, hence prevents fraud and losses due to errors. The development and implementation of these controls are done in several steps which include:
- Set out clear objectives of the Internal control system
- Providing an appropriate control environment – ensuring employees are trained and understand how the control procedures work
- Assess risk – Identify potential problems that could occur and find solutions to them
- Implement Control Activities – review each procedure to ensure that existing controls are sufficient and there are no excessive or unnecessary controls
- Communicate Information – prepare detailed reports for senior management on the business performance to help them make decisions that will increase efficiency
- Monitor – supervise and test control procedures regularly to ensure that they function effectively
Internal control procedures will bring financial discipline to the business by ensuring:
- Operational efficiency and a clear path to attain business objectives
- Compliance by the employees to the business policies and procedures
- Accuracy, reliability, and faithfulness of financial data
- Less or no emissions, errors, and flaws in the organization
- Prevent employee theft or fraud
- Safeguards business assets
Segregation of Duty
Segregation of duty provides a clear definition of responsibility for each employee. Through this control mechanism, instead of assigning all the bookkeeping, auditing, and accounting tasks to a single person, the job is divided between several workers.
This prevents employee fraud and theft because the further separated duties are, the harder it is for any single employee to commit a fraudulent act. It also helps to catch errors by reviewing and reconciling data between different employees making it difficult to hide the transaction. Lastly, it also sets out an explicit organizational hierarchy which allows the employees to clearly identify who they must report to and are under the authority of within the organization.
Management Information System (MIS)
MIS Report lays out all the vital company parameters comparing them with business performance to monitor and control certain aspects of the business such as company revenues. In preparation of this report, senior-level management communicates with different departments which substantially creates a link to the top-level management.
Relevance of Internal Audit for preventing fraud
Internal Audit is a procedure for the internal use of the business by inaugurating ethics and integrity within the business internal operations. It is considered as the top anti-fraud control mechanism as it strengthens business control procedures which are designed to mitigate fraud. If this process identifies fraud risk, a fraud investigation will take place. The internal audit fraud risk policy involves investigation upon any irregular or suspicious activity involving:
- Board of Directors
- Consultants or vendors
- Other parties in relation to the organization
Internal Audit can prevent fraud in:
- Company Annual Revenue
- Asset Misappropriation
- Vendor Fraud
- Accounts Payable Fraud
- Payroll Fraud
- Bribery and Corruption and many more
CDA Accounting and Bookkeeping Services LLC
CDA is a successful accounting firm which provides impeccable accounting and auditing services to firms in the UAE. We have conducted internal and external auditing for various firms in profound detail and have effectively stirred up company performance. Our well established and expert consultants focus on Internal Auditing Services, VAT Consultancy Services, Accounting & Bookkeeping Services, Accounts Outsourcing Services, CFO Services and Tax-Free Consultation in Dubai.
Hope you got clear about how internal auditing brings added value to businesses. If you have any doubts regarding internal auditing or any kinds of financial services, feel free to contact us. Our experts offer you a one-hour free consultation to drive away your doubts!