Friday, 21 August 2015

What is Internal Audit?

Internal Audit is an audit of records, operations and procedures of an organization when conducted by the staff of the organization itself. It is an in-house audit process carried out to identify areas of weak internal controls and concurrent rectification of errors and strengthening of controls.

The Internal Audit process may also be outsourced to a firm of certified accountants and auditors, as it is believed that such outsourcing will ensure that professionally qualified and well skilled personnel will conduct the audit in a systematic manner. Such outsourcing may also be cost-efficient as having a team of full-time employees employed for internal audit may turn out to be a costly affair.

The manner in which External Audit differs from Internal Audit is primarily in the scope of their checking as well as independence. An External Auditor may carry out an audit which may be statutory in nature, and with the objective to check if all operations are being conducted or records maintained as per the applicable statutes or laws. Whereas, the Internal Auditor's scope of working is defined by the management, and it focuses only on areas where the management wants it to conduct a check.

External Audit is an independent audit, where outsiders come and audit a business' records with a rational, unbiased, third-person perspective. On the other hand, internal audit is susceptible to bias and personal relations of the internal auditors with the respective managers and employees.

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