Internal audit

economic-dictionary

Internal audit is an audit modality based on the internal control and surveillance of a company or institution. Its implementation seeks to identify points for improvement and correct operation within a specific regulatory framework.

Through internal auditing, companies and institutions have the ability to examine themselves and make appropriate decisions in order to reduce risks and search for optimal points.

Mercantile companies and all types of organizations continuously practice internal control activities in order to self-assess and detect potential improvement processes or mechanisms.

Internal inspection is more common in large institutions or companies, both in the private and public sectors.

In addition, this occurs in a large number of economic sectors in order to adapt their operation and internal activity to the laws that govern each territory in which they operate.

This point is evident given that the larger the company, the greater the difficulty in controlling its operation. The same happens with the different processes or departments that make up its organization chart or structure.

Internal audit characteristics

As a mechanism undertaken by the company, an internal audit must be an instrument capable of meeting a series of objectives for it to be considered valid:

  • It should serve to locate the point of efficiency to be achieved in the short and medium term. In other words, it is an element of resource optimization.
  • It focuses on each of the phases of the production chain, analyzing and evaluating each department or task undertaken.
  • Compare the characteristics of the company with the standards of its sector. At the same time, it measures its legal nature with respect to the regulatory adjustment in which it must be situated, so that it can reduce possible risks.
  • An internal audit has become an unavoidable tool for companies when it comes to detecting legal anomalies, fraud or inefficient allocation of funds and resources.
  • The results obtained after an audit do not have to be legally valid against third parties, such as public organizations and governments. These resulting audit reports are simply useful for the company itself.

Professionals in charge of conducting an internal audit

The audit work involves specific preparation in different subjects. In this way, the evaluation processes of departments and processes such as accounting, legal and regulatory, control of occupational hazards and many others require highly trained auditing professionals.

At the same time, decision-making after analyzing the company requires a strong element of independence and objectivity.

Due to this point, for the execution of this type of task, there are often professional auditors from abroad. It is the concept known as external audit.

The company must offer them full access to the documentation of the company, its processes and employees. The purpose is to ensure that a fair and transparent image is offered, so that the auditor can draw the closest professional conclusion to reality possible.

Sometimes large companies do not outsource this service and have internal audit departments dependent on the company's own leadership or an audit committee.

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