Internal Audit Function
An Internal audit function is basically used for analyzing company’s performance in light of the performance objectives and other benchmarks set by the company’s management. An internal audit aids the company through providing it with important information regarding various aspects of its business operations. The function not only helps the company in identifying its control weaknesses but also provides it with suggestions as to how the identified control weaknesses and the risk that comes with the weaknesses can be mitigated.
Internal audit helps the entity in determining whether it is on the right path to succeed and also assists the company in meeting the set objectives by bringing a systematic and disciplined approach. The purpose of an internal audit is not to penalize anyone but to provide important information to improve the entity’s business operations or to provide risk assessment.
Why Do you Need Internal Audit?
Internal audit is a tool that is used to improve entity’s business policies, processes and procedures. An internal audit function assists the company by providing it with suggestions as to how to utilize the available resources in the most efficient and effective manner.
Top-level management uses internal audit to assess whether various divisions of the entity are performing up to the standards set for them. If a division is found to be non-productive, the entity’s management may decide to cut-off its losses on the division by eliminating it or reallocating the division’s resources in a new direction.
Changes in regulations by the government sometimes generate the requirement of an internal audit to ensure compliance with the new regulations. In case of change in marketplace environment, internal audit can help the company in preparing for the change and/or assessing the risks posed by the change in the marketplace. An internal audit can also help the company in identifying and quantifying the hidden risks as well as giving recommendations to counter the impact of the known risks.
Investment and other financial institutions sometimes require the entities to conduct internal audits to assure the financial assistance they are providing is being utilized properly and the risk to investment is being properly managed.
In some of the cases, new business ventures make internal audits an integral component of the business plan. These audits are conducted during regular intervals to assure that business operations are being performed according to the business plan.
The reason for internal audit depends on the type of information which the entity to be audited requires or need. The entity requiring the audit will decide the audit scope and the information needed and will be disclosed as part of a formal document named internal audit charter. With no specific instructions and guidance given in the internal audit document, the outcome of the audit can be unpredictable and unreliable. Requesting an internal audit without defining the scope and objectives may not result in the desired outcome expected from the audit. Reputable accounting and audit firms will require guidance and instructions from the entity’s top management in the authorization documents.
Who Require Internal Audits?
Internal audits can be initiated or required through several processes. For newly established businesses, the internal audit requirement is often part of their business plan. The objective of such audits is to make sure that company’s business is operating as planned. Company stakeholders such as lenders or group of investors can require the company to conduct regular internal audits to manage the risk to their investment. Government institutions can also require internal audit as to ensure compliance with relevant regulations. Company’s management can also initiate request to conduct internal audits to identify and quantify control weaknesses; to identify and manage risks; to identify divisions that are under-performing; to investigate inappropriate activities; and expose the outside threats to business success. Internal audit is a tool that is used by the company’s management to identify critical areas having control weaknesses as well as identifying the risks which the entity faces both from within and outside the company.
Who can Perform Internal Audit?
Internal audit is either performed by entity’s in-house audit department or by an accounting and audit firm. Entities that are small in size are unlikely to have enough resources for them to have a separate audit department of their own instead they outsource the function through the help of outsourcing accounting and audit firms. In case of entities that are operated on a larger with separate audit department, the decision regarding whether the audit should be performed by in-house department or outsourced to an audit firm becomes difficult as well as complicated. If the audit is required by an external party such as a government institution or a lender, the decision of appointing the auditor may remain with the entity requiring the audit in the first place. Internal audit required from within the company will most likely use the entity’s in-house audit department unless absolute objectivity is required.
Nadeem & Umendra Chartered Accountants is a licensed service provider in the UAE providing external and internal audit services in the free zones as well as the mainland UAE. Nadeem & Umendra Chartered Accountants is registered with all the leading banks and financial institutions in the United Arab Emirates. Our internal audit services include:
• Co-ordinating with existing internal audit department
• Complete outsourcing of the internal audit function
• Quality assurance reviews
• Operational audits
• Transformation in Internal audit
• Compliance audits
• Audits of information technology department
• Documentation and testing of internal controls
In addition to providing external and internal audit services, we also provide a number of other services such as advisory, bookkeeping, company liquidation and tax consultancy services in United Arab Emirates. Our objective is to provide our clients with quality services in the field of audit, accounting, Business Advisory and tax consultancy. In order to meet our objective, we have a team of qualified professionals having extensive experience in the field of audit, accounting, business consultancy and tax.
Should you require an approved audit firm for providing internal audit services anywhere in UAE, please contact us at +971 50 3958931 or email us at firstname.lastname@example.org / email@example.com