Most of the executives of successfully running small medium enterprises have this question in mind. We have already spending for statutory audits (namely external audits) and why we need to spend again for internal auditing? In simple, the answer lies in the purpose of audit. What does an external auditor do? Why an enterprise can’t avoid external audits? An external auditor will express an opinion on financial statement of the enterprise and in all countries around the globe there are statutory requirements to have an external auditing either for tax purpose or for renewal of licence or as per the requirement of a banker etc.
Then here comes a question already the external auditor will ensure the compliance of statutory requirement the what does an Internal auditor an contribute to the organisation. This notion is wrong an external auditor have no need to ensure statutory compliance he just needs to express his independent opinion on the financials of the companies. So even are the companies having an external auditor it does not mean the company is following all statutory regulations. Then who looks the company is following all statutory requirements, and who ensures weather the company is effectively managing the business risks. Who ensures weather the assets of the companies is well safeguarded, here comes the big role of Internal Auditing.
The internal auditing provides an ongoing monitoring and assessment of all activities in an organisation. Every process and every material transaction will be scrutinised in internal auditing. Internal auditing will help to improve the internal controls and risk management of the organisation. The scope of internal auditing is much beyond the financial audit.
In summary the Internal Auditing will help in:
a. Risk assessment and risk management
b. Asset management
c. Efficient operation flow
d. Improvement in the business process
e. Corporate governance