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Internal audits play an essential role in a company’s operations and governance. Every Organization has an internal auditor who gives impartial, discrete reviews of an organization’s processes. The Internal audit department is to provide a certification to ensure the employees abide by the law, procedure, and operational efficiency. Internal audits help the management identify any wrongdoing or fraud committed in an organization. Additionally, the financial reports and data collection methods are studied to see if the firms are unbiased in applying different means to achieve their corporate goals.
Internal Audits are conducted to assess the business based on a wide range of parameters. Such audits are classified into different categories. These include:
1. Compliance Audits
An internal auditor checks whether the company incorporates the rules, regulations, laws, and procedures of its region, state, or country. A compliance audit is an examination of a process or system to policies, plans, procedures, laws, regulations, contracts, or other requirements that govern the conduct of the area, process, or system subject to Audit. As far as the compliance audit is concerned, companies must regulate under Foreign Corrupt Practices Act (FCPA) or General Data Protection Regulation (GDPR). In non-compliance, companies must pay adequate amounts and penalties or other punishments.
2. Information Technology Audits
The IT audits include the assessment and evaluation of the technological infrastructure. This Audit also covers the cyber issues that require immediate attention. The review may be focused exclusively on IT or performed in conjunction with a compliance, operational, or financial Audit.
3. Performance Audits
Generally, the performance Audit is conducted by the auditors to ensure the effectiveness of the companies’ standards and core competencies. The management sets rules, standards, and procedures for the employees to strengthen their organizational performance in compliance with the standards and regulations.
4. Operational Audit
The operational auditors ensure the effectiveness of the company’s operational infrastructure. A review of an Audit mainly focuses on internal control procedures. The main objective is to improve the operation’s productivity, efficiency, effectiveness, and quality. Moreover, they also provide guidelines to improve the operational procedures to enhance the company’s efficiency.
5. Environmental Audits
The Organization must have an eco-friendly environment. When an Internal auditor conducts an environmental audit, they check that the premises do not violate environmental laws or policies.
An internal audit can ensure that an organization can comply with laws and regulations. The Audit gives a degree of safety and helps manage risks from fraud, abuse of power, or other scenarios. They also provide the management with an objective assessment of the processes and accounts. The management can improve their operational and financial performance using the services of an internal auditor.
Read our Article: Roles and Responsibilities of Internal Auditor
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