Learning the objectives & Importance of Internal Audit

Updated on September 02, 2023 12:20:10 PM

Internal audit plays a key role when it comes to evaluation and enhancement of an organization's management, finance and accounting, internal controls and governance. There are various objectives of internal audit depending upon the aspects of an organization's operations. Some of the key objective of internal audit are as follow:

One of the major goals of an internal audit is to evaluate and enhance the effectiveness of internal control of an organization.

Policies, procedures, systems, etc. are all parts of internal control which are designed to safeguard the assets, maintain accuracy and reliability of financial reporting.

Evaluation of internal control is necessary because it helps in observing and pinning weaknesses or gaps in procedure or system, controls the environment and improves management to limitate risk.

Internal audit helps in the detection of the fraud and provide safety measures to maintain the brand reputation of the company, also suggests changes in rules and internal controls to decrease the chances of fraud and misconducts in future.

To improve efficiency, productivity and reduction of costs, internal audits are being conducted on a regular, quarterly and yearly basis for continuous development and suggestions for improvement in processes.

It identifies inefficiencies and process restrictions that hinder operational excellence.

Risk management is yet another objective of Internal Audit to identify and minimize the potential risk within an organization. Risk assessment is important for understanding the risks and issues faced by the organization, solving them on a prior basis and consuming the resources effectively.

Maintaining financial accuracy and credibility are critical for decision making and stakeholders confidence. Internal audit cross checks and verifies financial information that also includes financial statements and transactions to ensure the accuracy complimenting with accounting standards. Also, helps in providing validation to the stakeholders and external auditors.

For any successful organization an effective governance is a paramount. Internal audit helps in assessing the governance and looks up to the board of directors to ensure the fulfillment of their assigned roles and responsibilities. Internal audit brings transparency, accountability and ethical behavior at each level of organization by providing independent evaluations.

Another objective of internal audit is to keep verifying that an organization is sticking to the laws, rules and regulations of the companies or not. Internal audit ensures the compliance that helps the organization to avoid the risk of any legal or reputational issue and in further enrichment of cultural and ethical conduct of a company. This is pivotal for those companies that are a part of highly regulated industries

After the assessment of internal audit and identifying the areas of improvement, it monitors the implementation of suggested changes and action plans. The follow up process is to ensure whether the actions are executed and the risks are being addressed adequately or not.

Effective resource management ensures that internal audit delivers value while optimizing resource utilization.

It ensures consumption of resources such as time, personnel, technology, etc. delicately. Internal audit helps in avoiding the exploitation of resources in the workplace and provides an eco friendly environment. Also it ensures that the organization is not harming the environment in any sense.

Appraisal in performance helps in recognizing the areas of improvements, achievements to ensure continuous development and success. Performance appraisal in internal audit not only assesses the organization but also evaluates the efficiency and effectiveness of internal audit function. It inspects the proficiency of an auditor, their contributions in organization's objectives, etc.

Internal audit acts as a strategic partner to management by offering valuable insights and recommendations. By staying informed about industry trends, best practices, and emerging risks, internal audit adds value beyond traditional audit activities.

Internal audit supports change initiatives by assessing their risks and controls.When the organization undergoes the certain changes and implementation of rules, internal audit provides valuable insights to ensure the changes to be made with minimum disturbance.

In conclusion, there are multiple objectives of internal audit which are necessary for an organization's success. Internal audit evaluates internal controls, ensures compliance, assesses risk management, enhances governance, improves operational efficiency, validates financial information, prevents fraud, facilitates change management, monitors action plan implementation, and provides value-added insights.These are the objectives that helps in strengthening the overall performance, productivity and effectiveness of an organization and in executing a fair internal audit.