Internal Audit

internalaudit1
internalaudit1

History

The Internal Auditing profession evolved steadily with the progress of management science after World War II., the theory of internal auditing was conceived primarily by Lawrence Sawyer (1911-2002), often referred to as "the father of modern internal auditing"

Meaning

Internal auditing is a continuous process of appraisal of an organisation's operations and evaluation and monitoring of risk management, reporting, and control practices. It is an independent and objective oriented assurance and consulting activity designed to add value and improve an organization's operations.

Evaluvation

With the implementation in the United States of the Sarbanes-Oxley Act of 2002, the profession's exposure and value was enhanced, as many internal auditors possessed the skills required to help companies meet the requirements of the law. Beginning in about 2010, the IIA once again began advocating for the broader role internal auditing should play in the corporate arena, in keeping with the IPPF's philosophy.

Applicability

  • every listed company
  • every unlisted public company having–
    • paid up share capital of fifty crore rupees or more during the preceding financial year; or
    • turnover(income) of two hundred crore rupees or more during the preceding financial year; or
    • outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or
    • outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and
  • every private company having–
    • turnover of two hundred crore rupees or more during the preceding financial year; or
    • outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year

Who Can Be Appointed?

An internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board. He may or may not be an employee of the Company.

Role of Internal Audit

  • Role in Internal Control :internal control designed to provide reasonable assurance regarding the achievement of the following core objectives for which all businesses strive
    • Effectiveness and efficiency of operations.
    • Reliability of Financial and management reporting.
    • Compliance with laws and regulations.
    • Safeguarding of Assets.
  • Role in risk management :internal audit function may help the organization address its risk of fraud via a fraud risk assessment, using principles of fraud deterrence. Internal auditors may help companies establish and maintain Enterprise Risk Management processes
  • Role in corporate governance :The internal auditor is often considered one of the "four pillars" of corporate governance, the other pillars being the Board of Directors, management, and the external auditor. This may include reporting critical management control issues, suggesting questions or topics for the Audit Committee's meeting agendas, and coordinating with the external auditor and management to ensure the Committee receives effective information.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."

Prepared By

Somnath P.K

CA Final,

Article Assistant,

B.C. Shetty

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Contact :

Ankit C Shetty

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