What is Internal Auditing | Purpose of Auditing 2022

What is Internal Auditing? 

We have a professional duty to provide an unbiased and purpose view. We must be independent of the operations we estimate
and report to the highest level in an organization: senior managers and governors. Typically this is the board of directors or the board of trustees, the accounting officer, or the audit committee.
To be effective, the internal audit activity must have qualified, skilled and experienced people who can work in accordance with the Code of Ethics and the International Standards.

The nature of internal auditing, its role within the organization, and the requirements for professional practice are contained within the International Professional Practices Framework (IPPF). The components and the detailed content of the IPPF are available in the Global professional guidance area of the website.

Audit

Importance of Auditing

• Detects Errors Or Frauds

Auditing helps in identifying all errors or frauds in the financial books of business by examining them. Auditors examine every financial record to verify their accuracy and discover all mistakes or frauds committed within the organization.

• Assurance To Owners And Investors

It provides assurance to owners and investors by checking all internal workings of the organization. Business owners will be satisfied by auditing reports that the books of accounts are properly maintained and all departments are working efficiently. Investors to gain confidence once the accuracy of financial records is verified.

• Ensures Validation Of Accounts

Auditing ensures the authenticity of all accounts by performing a detailed examination and presenting a trusted opinion regarding them. It checks the regularity of accounts and finds out whether they follow all prescribed rules and regulations.

• Helps In Decision Making

It supports management in decision making by providing them with crucial information regarding the organization. Auditing is an examination process which is done by a highly qualified professional having good knowledge of subjects like finance and accounts. They discover issues in organization workings and books of accounts and give their opinions for resolving them.

• Independent View Point

Auditing is an independent examination of accounts which is done by auditors which are external to the organization. Auditors properly inspect books of accounts and present their fair view without any biases or hidden agenda.

Click Here For Auditing

Types of Auditing

• Internal Audit

An internal audit is one that is conducted within the organization by its own employees and stakeholders. It is conducted for accessing the effectiveness of internal processes, reviewing financial information, and ensuring whether a business is complying itself with proposed laws and regulations. Internal audit is termed as a first checkpoint for every organization to check the authenticity of their book of accounts, operational processes, security protocols and IT infrastructure are in line with their internal aims and external regulatory requirements.

• External Audit

External audit refers to the evaluation of books of accounts by external persons that are independent of the business organization. External auditors are third parties like a charted accountant, IRS and a tax agency. These all have specialized knowledge and tasked with examination of organization’s book of accounts in compliance with (GAAS) Generally accepted auditing standards. External audit is mandatory in nature which need to be done due to shareholders requirements and regulatory reasons. It provides more transparency to business state of affairs and determine the accuracy of its accounting records. External audit is more preferred by investors and lenders for ensuring financial heath of business.

• Financial Audit

It is one of the most common type of audit which are mostly done external auditors. Financial audit is also known as a statutory audit which evaluates the truth and fairness of financial statements of business organization. Every business exists to generate profits and enhance wealth of their shareholders. Financial audit enables investor and other stakeholders to ensure whether the business is going well or not so that their capital remain safe and yield expected returns. Under it, financial transactions, procedures and balances are reviewed by auditors in order to provide their credit opinion to lenders, investors and creditors.

Click Here:- Best Tax Consultant in Dehradun

Conclusion: If you have any queries regarding Internal Auditing, you can connect us via email id and our email id is mbahugunaandco@gmail.com