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Advantages of Internal Auditing

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Advantages of Internal Auditing

Advantages of Internal Auditing

Most of the time people believe that an internal audit is only required for large, complex entities. However, this conclusion is very short-sighted when you consider the high volume of regulatory compliance and transaction issues facing entities, especially part of compliance in certain industries such as the insurance industry. So, here we discuss some of the Advantages of Internal Auditing

 

What is Internal Auditing? 

Internal auditing is an independent activity done to improve or increase the value of your company to reach its objectives by improving its internal operations in a systematic approach. This can be performed by third-party companies specialized in auditing. It can also be done internally by a separate in-house internal audit department. 

 

The Role Of Internal Audit

To put it simply, the role of an internal audit is to monitor the effectiveness of the internal control processes established by the management. 

Internal control also referred to as management controls include the plan of the organization, procedures, and methods used by the management to meet its goals, missions, and objectives. They also serve as the first line of defense against fraud, and violations of laws, provisions, and regulations of agreements and contracts. 

Internal controls include:

  • Processes: for planning, organizing, controlling, and directing operations
  • Systems: for measuring, reporting, and monitoring the performance
  • Actions: taken by the management and other parties for enhancing risk management and to increase the likelihood of achieving the established goals and objectives

Benefits of having a good system and organization of internal controls include:

  • Improves efficiency in operations
  • Increases financial integrity and reliability
  • Establishing monitoring procedures
  • Helps protect assets
  • Reduces the possibility of fraud
  • Ensuring compliance with statutory laws and regulations

How Does Internal Audit Monitor the Effectiveness of Internal Control?

The internal audit serves many purposes to monitor the effectiveness of internal control. The main tasks include: 

  • Risk assessment: Assisting management to identify and prioritize processes and areas that need attention and audit focus.
  • Control assessment: Helps in identifying gaps known as ‘trouble spots’ where controls and procedures are poorly designed.
  • Process walkthroughs and documentation: Gaining enough knowledge of the processes and procedures, especially concerning IT systems utilized in the processing of high volumes such as claims/policyholder data in the insurance industry.
  • Testing: Conduct tests to verify whether the controls are working as they were designed to.
  • Providing: Provides observations and recommendations to improve controls and processes. 

Now, let us look at some of the advantages of internal auditing or why you should perform internal audits in your company. 

 

7 Advantages of Internal Auditing

Listed below are some of the advantages of internal auditing:

 

  • Ensure the use of controls

The first and foremost advantage of internal auditing is that you are providing controls and using them. It will be a waste of your time and money to implement measures that help control your processes and not pay attention to that information. With the help of internal auditing, you can ensure that the results of these controls will be thoroughly checked and evaluated. 

 

  • Check policies implementation

One of the main purposes of an internal audit is to show if your internal policies are actually being implemented. It highlights the impact it may or may not have on your company’s routine. 

 

  • Evaluate the effectiveness of your standards

Another advantage of internal auditing is to verify that the standards you have are being met. This is fundamental in ensuring compliance, corruption, avoiding fraud, and other problems related to ethics. 

 

  • Anticipate and try to solve problems

During the evaluation of policies, controls, and standards, it is possible to identify real and potential problems that can put your company at risk. This list of potential problems needs to be a target of an analysis of compliance risks prior to solving them, but these issues need to be prevented or solved in order to avoid such major problems. 

 

  • Identify possible improvements

Another major advantage of internal auditing is that it helps to identify possible improvements in the controls and processes. Many times certain things are overlooked which can cost the company big bucks. This is the main reason why audits are performed before making major changes. 

 

  • Increases company reliability & continuity

As it is evident from the advantages mentioned above, we can see that an internal audit allows you to ensure efficiency and transparency in your company’s processes. Besides, Internal audit plays a critical role in identifying gaps in business continuity plans and offering advice on revising and upgrading recovery techniques and plans to safeguard operations from potential interruptions. Your organization can help build trust between customers, employees, partners, and providers.

 

  • Contributes to decision making

Finally, by excluding the managers from the audit and with all the information that is gathered, the resulting report will show an external vision of your organization. This helps the management layer to make informed and better decisions for the future of their company. 

These are some of the main advantages of internal auditing. This can help you to improve your company’s internal controls and processes. If you would like to have an internal audit for your company, get the help of audit firms in Dubai such as A&A Associate. 

Also, read how business setup consultants in Dubai can help your business. 

A&A Associate in Dubai on of the top audit firm in dubai. One of the top business management consultants in Dubai, our experts help in evaluating the systems and processes of your business to recognize and sort out problems. We help make decisions and prevent damage, loss, or harm to your business. We have a proficient team of individuals who are experts in leading risk management projects across all aspects of an enterprise. 

Contact us for help with internal auditing for your business now! 

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