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INTERNAL AUDIT

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  1. INTERNAL AUDIT

  2. CONTENTS • What is internal audit? • Scope & nature of internal audit • Benefit of internal audit • Frequency of internal audit • Fees on internal audit • Internal audit in NGOs • Who can be internal auditor • Relying on the work of internal auditor

  3. INTERNAL AUDIT : MEANING • It is independent appraisal activity for review of • Accounting • Financial & • Other operation as basis of • Protection • Constructive service to the management

  4. NATURE & SCOPE Nature • Not a function of authorization & recording • Function starts only after authorization Scope • The scope is as determined by the management

  5. BENEFIT • Helps to ensure functioning of ic system • Ensure only genuine expenses are accounted • Meet the legal compliances • Minimize the occurrence of fraud & error • Ensure the existence of internal check • Tool of achieving control on all activities of organisation

  6. BASIC PRINCIPLES OF ESTABLISHMENT • Should have independent status in organization • Should be free from executive function • Can investigate any phase of activity at any time & under any circumstance • Must have clear understanding of the objective • Staffs should be adequately qualified

  7. AUDIT FEES • It depends upon • Size of the audit team • Seniority of the audit team • Complexity of the work • Frequency of reporting • Regional dispersion

  8. FREQUENCY • The frequency depends upon • Terms of reference & needs • Structure of organisation • May be on • Monthly basis • Quarterly basis • Half yearly basis • It may be carried on periodical or continuous basis

  9. INTERNAL AUDIT IN NGOS • It is quite different from corporate internal audit • It depends upon the size & complexity of NGOs • If NGOs crosses 5 crore it is considered essential • NGOs generally prefer a firm familiar with their environment & operating conditions • In NGOs same ca firm can carry internal & statutory audit

  10. WHO CAN DO INTERNAL AUDIT • Management appoints internal auditor • May be an employee or outsider • Large organisations have system of internal audit as internal part of IC system • Ca firms also provide this service • Professional expertise & exposure

  11. RELYING UPON INTERNAL AUDITOR • SA 610 as issued by ICAI prescribes circumstances to rely on work of internal auditor • Scope of internal audit • Qualification of the internal auditor • Experience of the internal auditor • Procedure followed by him • Action taken by the management

  12. CONCLUSION • Internal audit is independent exam of the IC system • It is conducted to evaluate the execution & effectiveness of the IC system • Procedure of audit is independent • However auditor may be dependent or independent • Reporting is to be done to the C.E.O. Or the audit committee if any • More information please refer AccountAble 133

  13. FURTHER READING • AccountAble 133: Internal Audit

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