Home » Accounting » Effectiveness and Efficiency of the Internal audit process

The internal audit function is one of the most essential support functions for any organisation which if utilized to its fullest potential can result in tremendous benefits for the organisation including better functioning controls, better risk management and compliance, lesser leakages of funds and revenues and better utilization of resources. But unfortunately for many organisations IA has been reduced to a mere compliance tool not yielding the results it should yield. The blame for this lies both with the organisation and the internal auditor.

The purpose of this article to identify the things that the organisation and auditor must focus to improve the effectiveness and efficiency of the internal audit process.

Auditors’ Role

1. The IA function has over the years become more and more transaction oriented losing much of its system focus. Both transactions and systems are important and a proper balance should be maintained between them. Ideally for most organisations 70 per cent of the efforts must be directed to systems and 30 per cent of the efforts should be devoted to transactions. Transactions focus would help identifying immediate leakage of funds and inefficiencies and also non- functioning of set controls whereas systems focus will enable the organisation in efficient execution of its plans and strategies, identify deviations as well as mitigating risks and also enable to focus on longer term where though there is no loss due to existing infrastructure and practice but where this is significant chances of loss in the future due to lacuna in control design and implementation.

2. The internal auditors must look themselves as extended part of client’s organisation in terms of delivering value without compromising on their integrity, objectivity and independence.

3. They should imbibe a spirit of honest and open communication and look to work harmoniously with the client personnel developing mutual trust and understanding.

4. The internal audit teams must have thorough understanding of the clients business and the practical challenges faced by the client and this must be reflected in its approach, program, procedures and reports.

5. The internal audit team must comprise of the people who are committed to continuous learning and are aware of latest developments in business environments laws and regulations. These people must keep on learning new techniques and tools to deliver more value to client organisations.

Organisations’ Role

1. The organisation must be clear about its purpose for hiring internal auditors and must communicate the purpose clearly to the auditors to increase the quality of the function.

2. Organisation must not have a myopic view of internal audit restricted to immediate financial impact but it should view the IA function as an integral part of its business system put in place to checking effectiveness and efficiency of its other control functions and processes.

For a meaningful functioning of the IA there must be clear commitment and support of the top management and proper communication down the organisation that the auditors are not hostile adversaries but friends of the people out there to enable them to do their jobs in a better way and in alignment with corporate objective

(The author practices as a Chartered Accountant under the name and style of Rishabh Kumar Barmecha and Associates and is an expert in auditing, financial investigation, direct and indirect taxation. The author can be reached at rishabhkumarbarmecha@gmail.com Mobile No.  91 9007909221 or Twitter @CARKBarmecha.)

Print Friendly, PDF & Email

2 thoughts on “Effectiveness and Efficiency of the Internal audit process

Leave a Reply

Your email address will not be published. Required fields are marked *

Name
Email
Website