Internal Auditing On Financial Reporting - Know How?
Internal Auditing is an independent, objective assurance and consulting activity designed to add value and evaluating the effectiveness of internal controls. It includes assessing of risk of internal control weaknesses & examining of financial records of a company. It helps in securing compliance with the various laws applicable to the organization and ensure that financial statements are accurate, consistent, and conform to generally accepted accounting principles.
Benefits of Internal Auditing
Internal audit is the evaluation of all aspects of an organisation by an internal auditor. Various benefits associated with the Internal Auditing is such as: –
- Enhancement in business operations, it includes decrement in errors and improved quality of performance.
- Minimizing Compliances issues.
- Helpin mitigating the risk within an organization to improve processes and controls.
- Enhancing the quality of financial reporting by ensuring that it is free from material misstatement.
Impact of Internal Auditing on Financial Reporting
Financial performance of an organization is considered to be an outcome of internal audit function of internal controls, risk management & governance. These factors can cause both positive and negative environments for financial performance in terms of budgeting performance and financial accountability. Internal audit impact Financial Reporting through various ways such as: –
- It ensures that the accounting system meets stakeholder requirements related to reporting’s accuracy and reliability.
- It provides insight into management’s risk management strategies.
- It provides insight into potential areas for improvements in efficiency or cost savings.
Challenges Involved With Internal Audit
Despite the numerous benefits associated with Internal Auditing, there are some challenges comes in the role as well such as:-
- The expense of setting up and working as an Internal Audit in an association is extravagant.
- Inadequate time affects quality of work.
- Complex Regulatory Environment.
- Difficulty in obtaining required access to the relevant information.
- Staying up-to-date with changes or developments in regulations or laws that could affect an audit.
- Time Management.
Conclusion
In conclusion, an internal audit ensures that organization follow the law & rules in a timely manner. It helps in detecting errors early on, and enhance the quality of reporting. However, while doing internal audit, challenges associated with it must be kept in mind and try to overcome it. Overall, with proper planning and implementation of internal auditing process, it provides a level of security and aids in the management of risk arising from fraud, power abuse, or other scenario.
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