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Internal audit
The document discusses internal audit, providing definitions, objectives, principles and need. It defines internal audit as an independent function that appraises an entity's operations to strengthen governance and risk management. The scope of internal audit includes reviewing accounting and controls, ensuring efficiency and compliance. It is needed due to increased business size, regulations, and technology usage. Internal audit adds value through risk management, assurance, compliance and fraud prevention. Key principles are integrity, objectivity, independence and professional care. The Companies Act 2013 requires certain public and private companies to appoint internal auditors.
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Internal audit
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- 2. WHAT IS INTERNALAUDIT Internal audit is an independent management function, which involves a continuous and critical appraisal of the functioning of an entity with a view to suggest improvements thereto and add value to and strengthen the overall governance mechanism of the entity, including the entity's strategic risk management and internal control system. Rahul Mithia
- 3. Scope And Objective •Review of accounting system and related internal controls • Examination for management of financial and operating information • Examination of the economy, efficiency and effectiveness of operations including non-financial controls of an organization • Physical examination and verification • Adoption of standard accounting practices • Proper authority on the acquisition and disposal of assets • Prevention and detection of fraud Rahul Mithia
- 4. NEED FOR INTERNALAUDIT • Increased size and complexity of businesses • Enhanced compliance requirements • Focus on risk management and internal controls to manage them • Unconventional business models • Intensive use of information technology • Stringent norms mandated by regulators to protect investors • An increasingly competitive environment Rahul Mithia
- 5. INTERNAL AUDIT ADDINGVALUE TO ORGANISATION • Risk Management • Providing Assurance Regarding Internal Controls • Compliance • Fraud Detection • Consulting and Operations Rahul Mithia
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- 7. Internal audit asper Companies Act 2013 section(138) • The Companies Act 2013 provide statutory recognition this area has opened a scope of Chartered Accountants and others professionals • Section 138(1) of the act provide such class of companies as may be prescribed shall be required to appoint an internal auditor, who shall be either be an Chartered Accountant or a Cost Accountant Or such other professional as may be decided by the board to conduct internal audit of the function and activities of the company Rahul Mithia
- 8. Applicability of Internal Audit PublicCompany Private Company Listed Company Unlisted Company Rahul Mithia
- 9. Listed Company Public Company UnlistedCompany Applicable to all listed Company Applicable to every unlisted company having 1.Paid up share capital 50 Crore or more during preceding financial year OR 2.Turnover of rupees of 200 crore or more during preceding financial year OR 3.Outstanding loan or Borrowings from banks or Public financial institution exceeding one 100 Cr or more during the preceding financial year OR 4.Outstanding loan of 25 crore or more at any time during the preceding financial year Rahul Mithia
- 10. Private Company 1. Turnoverof 200 crore rupees or more at ant time during the preceding financial year OR 2. Outstanding loan or borrowings from banks or public financial institution exceeding 100 crore or more at any point of time during the preceding financial year Rahul Mithia
- 11. INTERNAL AUDIT INTODAYS ORGANISATION • Relationship with the Audit Committee • Relationship with the Management • Relationship with the External Auditor • Co-ordination of internal and external audit work increases economy, efficiency, and effectiveness of the overall audit process. Rahul Mithia
- 12. Standards on Internal Audit 1.Planning an Internal Audit 2. Basic principal Governing Internal Audit 3. Documentation 4. Sampling 5. Analytical Procedure 6. Quality Assurance in Internal Audit 7. Terms of Internal Audit Engagement 8. Communication with Management 9. Internal Audit Evidence 10. Consideration of Fraud in Internal Audit 11. Internal Control Evaluation 12. Enterprise Risk Management 13. Internal Audit in an Information Technology Environment 14. Knowledge of the Entity and its Environment 15. Using the Work of an ExpertRahul Mithia
- 13. Functions Of Internal Auditor •Ensure the correctness and completeness of accounts. • Examine the accounts to ensure regularity in expenditure. • Look into the propriety of the financial transaction. • Ensure that the resources expended by the executive have produced desired result. • Keep a constant vigil on all financial dealings and transactions in the organization. • Find out whether there have been any financial irregularity or malpractice in incurring expenditure. • Point out mistakes and indicate how they can be rectified and avoided in future. • Verify the physical achievements of schemes/projects in the Institutions. Rahul Mithia
- 14. Process of InternalAudit • Notification • Planning • Opening Meeting • Understanding the Policies and Procedure • Execution of Internal Audit • Closing Meeting • In House Internal Audit Review • Internal Audit Reporting • Cover Page • Table Of Contents • Executive Summary • Background of module and Audit • Methodology • Purpose and scope of audit • Scope limitation • Summary and Detail of audit observation Rahul Mithia
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- 16. Period Place Audit Team Supervision Audit Scope: Transaction Vouching, Inventory System Controls, Internal Controls, Intra Unit Transactions, Excise Records, TDS, FBT and Service Tax Audit Observations 1. Audit Observation . System Weakness Suggested Improvements Rahul Mithia INTERNAL AUDIT REPORT OF ……………………………………..