Internal Audit#
Definition#
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.
Objectives#
- Evaluate internal controls
- Ensure compliance with policies
- Safeguard assets
- Ensure reliability of financial information
- Promote operational efficiency
Scope#
- Financial controls
- Operational controls
- Compliance controls
- IT systems and controls
- Risk management
Types of Internal Audit#
1. Financial Audit
- Review of financial statements
- Verification of accounting records
2. Operational Audit
- Efficiency and effectiveness of operations
- Process improvement recommendations
3. Compliance Audit
- Regulatory compliance
- Internal policy compliance
4. IT Audit
- System security
- Data integrity
- Access controls
Process#
- Planning and risk assessment
- Fieldwork and testing
- Findings and observations
- Draft report
- Final report
- Follow-up
Reporting#
- Report to Audit Committee
- Report to Board of Directors
- Regular status updates
Vs Statutory Audit#
| Internal Audit | Statutory Audit |
|---|---|
| Voluntary | Mandatory |
| Forward-looking | Historical |
| Advisory | Assurance |
| Reports to management | Reports to shareholders |