Internal Audit And Management Audit
Audit, a specific term, is defined as a planned and documented activity or an official investigation and evaluation of the accounts of an organization to determine the adequacy and compliance with pre-established procedures or the documents, which are applicable, and the effectiveness of implementation. It is a vital part of accounting. It is thorough examination and evaluation of an organization’s financial statements without any prejudice. Among the different types of Audit that we have come to know, Management Audit Internal Audit Services also has profuse amount of importance in the world of audit.
Internal Audit which is also known as a first-party audit, is the auditing by organization of its own systems, i.e. self assessment which is ultimately used to ascertain the strengths and weakness against requirements, and an organizations own standards. Internal Audit is an activity, which is independent, objective assurance and consulting, designed in a way that, at an end it adds value and improve an organization’s operations. By bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process, it helps an organization to achieve its objectives. There may be some potential threats to the organization’s health and profitability. Thus internal audit is designed to review what a company is doing in order to identify those threats, and to make suggestions to reduce the risk that are directly or indirectly associated with those threats in order to minimize costs. Professionals called Internal Auditors, who are employed by organizations, perform Internal Auditing Services.
Some of the major roles and responsibilities of Internal Audit functions are:
- Draws conclusions from examinations and provides reasonable assurance or certainty that management of risk, control and governance systems are functioning, as it was intended and will enable to meet the goals and objectives of an organization.
- Reports internal control deficiencies and risk management issues identified directly to the audit committee and furnish advice for ameliorating the organization’s operations in terms of both efficient and effective performance.
- Evaluates information security and related risk exposures.
- With consultation of legal counsel, evaluates regulatory compliance.
- Evaluates preparedness of the organizations in case of business interruption.
- Establishes accessible communication with management and the audit committee.
- Participates in continuous education and staff development
- Provide aid to the company’s anti fraud programs.
Changes in the business environment are inevitable. Some changes are major and these are the causes for which Management audit is necessitated in the business. The utter inspection and evaluation of competencies of a company’s management in order to evaluate their effectiveness, especially regarding the strategic objectives and policies of a business is what we know as Management audit. The primary objective for the management audit consultants is to analyze the management team in relation to their competition. Thus, we can conclude that it is not necessarily done to appraise individual executive performance. It is a systematically done examination of the decisions and actions of the management to analyze the performance. Some of the managerial aspects like organizational objective, policies, procedures, structure, control and system, are reviewed by the Management Audit Consultants. It is basically done to check the efficiency of performance of the management over the activities of the company. It is generally conducted by the employee of the company or by the independent consultant and concentrated on the crucial evaluation of management as a team rather than appraisal of individual.
Some of the major roles and responsibilities of management audit are:
- Identifying the objectives of an organization if such are not set up.
- Allocating the overall objectives of an organization into small fragments.
- Reviewing the whole structure of an organization and asset of an organization deciding whether the target can be achieved or not.
- Examining all the scope of work and liability centers.
- Helping the members of management to make effective discharge of duties
- Helping in the improvement of profits.
By - Uttam Neupane