What is Internal Audit? Why is internal audit so important?

Internal audit is a very special function that is independent of accounting, but at the same time, it needs to supervise the management and financial processes of an enterprise and organization, and multiple departments, and improve measures for enterprises and organizations from the inside to maintain their compliance and integrity.

What is Internal Audit?

The concept of internal audit was first proposed and defined by the Institute of Internal Auditors (IIA) in 1947. In the latest definition update, Internal audit is defined as:

“An independent, objective validation and advisory activity designed to add value and improve an organization’s operations. It helps an organization achieve its objectives by applying a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance programs. “

Many large-scale enterprises, multinational enterprises, and even government agencies have internal audits, which use independent and effective systems to help maintain the operation of the entire organization and assets in legal compliance, integrity, and compliance. and can be monitored and evaluated.

Under the huge corporate structure, internal audit will be a function, directly subordinate to the top management, with an independent status, performing audits for the management, supervising the work of various departments and sub-organizations, just like a secret agent to ensure that each department complies with the interests of the management, ensure effective governance and risk management, and reflect them truthfully, and make relevant improvement suggestions.

What is the work of an internal audit?

In general, an internal audit actually assists the company to make good internal control, from risk management to independent assessment of the internal system and governance system of the organization, so as to achieve reasonable assurance and report to the board of directors / Management accountability, and even participate in often heard special reviews, investigations of fraud, etc.,

Specific work includes:

• Assist in compliance with internal policies, relevant laws and regulatory guidelines;

• Ensure that financial information is reliable, complete, accurate, comprehensive and timely;

• Assess information security and associated risks;

• Ensure that financial information in the electronic information system is continuous and reliable;

• Support the accuracy of accounting records and reports;

• Safeguarding assets and detecting fraudulent activities;

• maintain open communication with management and the audit committee;

• Participate in special investigations as directed by management or the Audit Committee;

• Establish audit regulations, policies and procedures;

• Report the deficiencies of audit findings to management or the audit committee and make recommendations for efficient improvement;

• Participate in continuing education and employee development efforts;

Why is internal audit so important?

Internal audit is extremely important because it can continuously provide independent and objective opinions to management on the systems and measures of enterprises and institutions, so as to improve relevant results, adapt to the ever-changing environment, and provide enterprises and institutions with the following benefits :

1) Plug the loopholes

An internal audit takes the opportunity of supervising the work of the accounting department to prevent mistakes and frauds, and can also correct problems arising from power generation as soon as possible, plug management loopholes, and ensure reliable governance and asset safety.

2) Improve economic efficiency

As the internal audit supervises the efficient implementation of the internal policies of each department, it puts forward suggestions for improvement of business activities in the context of familiarity with the internal situation of the enterprise, which can not only reduce costs but also positively improve economic benefits.

The above information is for reference only. If you have any questions about Internal audit, we welcome your inquiries.