Enterprises and business organizations have become sophisticated and huge. Every organisation having multiple segments like a company may have separate segments of Construction, Trading, Consultancy etc. Each segment has various departments like Marketing, Procurement, Inventory, Accounts, Admin & HR etc. Each department has various processes like for procurement team is first required to get acquisition form filed from site, calling for tenders for placing order, selection of appropriate supplier, raising purchase order, placing order etc.
For every activity, pre-defined procedures, list of documents is prescribed. However, involvement of multiple employees, process, documents etc. may not end up giving expected results to the organisation. To solve this issue, the requirement of internal audit arises.
Need arises that all processes are implemented properly and are giving the desired results. Internal audit is not confined only to financial transactions but also is extended to the task of reviewing the internal process and internal control to ensure efficiency and economy of resource utilization. This makes it essential to review all the operations, process and internal controls of the entity and also evaluate the effectiveness of management.
In India, even the statute has recognized that internal audit is necessary for the efficient running of business enterprise. The aim of any organization behind conducting the internal audit is assuring that various internal processes, rules, regulations, policies, compliances, corporate governance, and risk management are intact and followed properly.
Discrepancies, frauds, incorrect, or lesser efficient processes can be identified and improved before it is pointed out by an external auditor. Also, this boosts the efficiency of the operations of the business if conducted periodically.