Overview In a massive relief to the companies, the Ministry of Corporate Affairs (MCA) vide gen...
Internal audit is a self-governing and objective assurance activity designed to add value and improve an organization’s operations.
All MFIs shall be undergone for Internal Audit. MFIs shall appoint an Internal Auditor to conduct the internal auditor. An internal auditor should report directly to the Board of Directors and not to the Director or the senior management of the MFI. The finding of the audit may concern management at various levels, reporting to the same persons would create a potential conflict of interests. The audit report itself should be written in such a way that the identity of all contributors to the findings is protected. Otherwise, it will be increasingly difficult for the auditor to gather sensitive, critical information in future audits. Finally, an individual should never serve as an internal auditor for a unit(s) for which he or she has any direct operational or managerial responsibility.
Internal auditors work varied from the function to function. Below are some key areas of auditing:
The internal auditor shall evaluate an organization’s management of risk. All organization faces various risks, the auditor shall analyze the same. Since the success of any organization is depending on how they manage those risks effectively. The auditor shall assess the risk management processes, systems of internal control and corporate governance processes, across an organization.
An internal auditor shall intimate discrepancy in an organization to manage. An auditor also helps management in improving organization practice. If a manager is concerned about a particular area of responsibility, the internal auditor can help to identify improvements.
An internal audit is covered from mailroom to the boardroom is involved in internal control. The internal auditor shall evaluate the risk and report on the effectiveness of the implementation of management policies.
It is the duty of Management to identify risks affects the organization’s growth and indicate to the internal auditors which helps them to expect possible future concerns and opportunities providing assurance, advice, and insight where it is most needed.
A systematic audit helps in attaining objectives and managing valuable organizational resources. Internal auditors work diligently with line managers to review operations then report their findings.
Any guarantee provided to executive management and the board’s audit committee that risks are being managed effectively is not covered under the scope of an internal audit. There are likely to be other assurance providers who perform a similar role.
It is a common feeling that audit means just checking of books of accounts and vouchers. Since we know the scope of an internal audit is very large, which is also evident from the objectives that the function has to achieve. Following are the border functions of Internal Auditor:
Financial reports and records:
Scrutinise all the receipts, vouchers, ledgers, cashbooks, client passbook, MFIs bank passbooks, cash balances.
Loan applications, promissory notes and other documents required as per policy related data entered into Excel spreadsheets or software.
Scrutinise meeting discipline on timing, conduct, staff and client discipline, check passbooks interact with clients can also check loan utilization.
Staff discipline, hygiene, file arrangements and cataloging.
The scope of an Internal audit is wide to cover and to cross-check various reports. The basic idea is to check any kind of policy deviation or identify any situation, which can be a risk for the organization.
Internal audit plays the vital role in managing risk of an MFI and allows feedback to the top management. An internal audit can significantly control MFIs risk and is, therefore, it is an indispensable function.