What is Internal Audits?
Internal audit is a post-transaction examination of to appraise the correctness and adherence of activities of an organization on a continuous basis by the authorized staff. It is a thorough review of records and operations undertaken in an organization within a given period.
Internal audit is an independent appraisal of the accounting activities of an organization to adhere to strict financial rules and to check the spending that is not within the company’s needs. It is a guarding and constructive arm of the organization to instill sanity in spending, purchasing, and acquisition of assets.
For companies to be justified about in setting up internal audits, the following functions must be performed for the good of the organization to worth the aim of having dedicated staff to do an audit.
Verification of correctness of records
Statistical records and financial accounting must be in order before presenting it to management. All financial records must be in proper order before presenting to management and external auditors take a look at the financial records of the organization.
The fact that internal audit checks every financial activity makes the staff be alert to their functions and avoid being caught with outrageous prices of items or using the company’s money for personal reasons.
Detection of errors
Apart from helping to detect fraud, an internal audit helps to detect errors and makes suggestions to management to avert such problems in the future.
Undertaking financial investigation
To undertake financial investigations and other related matters, internal audit is the first call before inviting external auditors if the matter is more than what the internal staff can handle.
Early detection of fraud
To detect fraud and financial misappropriation early, internal audit is the best tool to check erring staff that is in trying to defraud an organization.
Morale booster for honest staff
Since the evaluation of the performance of staff can be done anything deem fit by the management, honest staff can be boosted by the fact that they are clean and have nothing to explain o auditors.
Detection of misuse of resources
This is perhaps an aspect where internal audits are very important, in the area of detecting misuse of resources that belong to the organization, though help to minimize undue spending.
To have competent internal audits that can check all financial activities efficiently, CPA firms may need to be consulted to help set up a department or any other financial advisor to coach on the areas and limitations of the internal audit.