Internal Audit – Benefits and limitation Internal audits may greatly improve a company's performance. Internal auditors assist companies in identifying major risk issues. This enables the organisation to foresee possible future problems while also detecting present weaknesses. It also enables a corporation to discover poor processes and controls and gives a chance to improve on them. Internal audit is responsible for ensuring that a company's risk management, governance, and internal control mechanisms are in good working order.
Benefit of Internal Audit
1. APPROPRIATE ACCOUNTING SYSTEM
2. IMPROVED MANAGEMENT
3. PROGRESS REVIEW
4. EFFECTIVENESS OF CONTROL
5. ASSET PROTECTION
6. DIVIDEND OF WORK
7. MAKE NO MISTAKES
8. FIXING RESPONSIBILITY
9. EXTERNAL AUDITING TO BE DONE
10. THERE IS NO DECEPTION.
11. IMPROVED PERFORMANCE
12. EFFECTIVE USE OF RESOURCES
13. SOLUTIONS FOR EXAMINATION
14. NOTIFICATION TO STAFF
LIMITATION OF INTERNAL AUDIT 1.
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INCOMPETENT STAFF: One restriction of internal auditing is that audit staff may be incompetent. Internal auditing is useless to management. Internal audit professionals may be inexperienced and undertrained. STAFF SHORTAGE: There is a staff shortage in internal audit. There may be a need for realistic audit professionals to inspect the record; yet, owing to personnel shortages, reaping the advantages of internal audits is tough. TIME LAG: Internal auditing is restricted when there is a time lag between recording and verifying items. Accounting and internal audit must collaborate with the least amount of time lag possible. EXECUTIVE FUNCTION: One of the constraints of internal auditing is that the internal auditor may be associated with the executive function. He is not entitled to see the accounting books and other data in this instance. He is incapable of seeing his own weaknesses. ERRORS: One downside of internal audit is the possibility of accounting errors. It is reliant on the internal audit staff's competence. When the audit crew is knowledgeable, errors are decreased. If audit personnel is insufficient, there is no assurance that audited accounts are error-free. RESPONSIBILITY: An internal audit's drawback is that management may not feel compelled to fulfil the audit requirements. The audit staff may provide suggestions for the business's appropriate functioning. Top-level management may disregard suggestions. The audit effort is thus worthless to the organisation in this instance.
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DUTIES: One restriction of internal auditing is that there may not be an appropriate separation of duties. The internal auditor is unable to assign responsibility for the failure to complete obligations in this situation. The separation of responsibility must be understood by management. The audit task might expose the flaws of firm personnel; else, the whole arrangement will be a waste of time.
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