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Internal audit is one independent consulting activity that has been designed to improve the organization’s performance. The process of internal auditing helps businesses in UAE to accomplish their predetermined objectives by setting up a systematic and disciplined approach to evaluate as well as improve the efficiency of the operations. This increases the effectiveness of a company’s risk management, control, and governance processes as well.
The report of an internal audit helps to recognize the areas where corrections or innovations might be made. Along with finance and IT, an auditor has to review the company’s supply chain, cultural and ethical aspects.
Why is internal auditing required?
The internal audit’s role is to render independent assurance to a company that the risk management, internal control processes, and governance are operating quite effectively according to the Institute of Internal Auditors. Internal audit is designed to enhance and mature the business exercises. It also gives insight into the policies, culture, procedures, and assists board and management oversight by identifying internal controls.
Dubai, being a premier global city and preferred destination for entrepreneurs and investors the world over, is one of the promising commercial and trading hubs. The government of Dubai is thus very particular about the rules and regulations of the land. The number of audit firms has increased due to the mandatory norms issued by the government. Thus, an internal audit helps an organization to identify errors. It also helps an organization in the ways as follows: –
- It helps to verify company assets and also recommends proper security measures for their protection.
- It computes the firm’s compliance with the policies and procedures of the audit.
- It also reviews operations to evaluate if results are matching the predetermined objectives and checks if operations are being carried out as planned
- It investigates the company reports for any fraud, theft, or even misconduct.
Benefits of having a good internal audit system
- Safeguarding of assets
- Reducing the chance of fraud
- Increasing financial reliability and integrity
- Enhancing the efficiency of business operations
- Ensures compliance with the laws and regulations
What is the Role of an Internal Auditor?
The role of auditors in Dubai is to provide management along with independent assurance on the organization’s internal controls, strategies of risk management, and governance is operating correctly. Their functions are to supervise, evaluate, investigate analyze the risks & controls; check and ensure information and compliance with policies, procedures, and laws. An internal auditor also assesses the achievement of goals and objectives as set by senior management. In case the goals have not been fulfilled, the auditor in Dubai identifies the process gaps and makes suggestions for improvement.
- Operational activities: An internal auditor in Dubai evaluates the process of operation of a company by interviewing departmental employees, accounting managers, external auditors, and risk specialists. The operating environment of a company describes the management’s leadership style, ethics, and business practices. The auditor can also look at recent industry trends and also at the regulations to determine the organization’s operational efficiency.
- Review controls: An internal auditor in Dubai reviews audit reports from the past or working papers and determines how the internal control system operates. They also inquire about the employees who work on the control system and check the adequacy of the internal control system. A certified auditor applies the required expert knowledge to detect procedures and methodologies to build controls.
- Testing controls: An audit tests an organization’s controls, its policies, and procedures to ensure that such controls are perfectly designed and have been operating effectively. The firm should have a control system to provide detailed procedures and guidelines for a better decision-making process.
- Maintain account balances and details: An auditor in Dubai examines account balances to determine if such statements are accounting to the standards and regulatory mandates. They also test account balances to check the status of financial reports. A complete report should include a balance sheet, cash flow statement, profit and loss account, and a statement of a stockholder’s equity. The details are examined for identifying any material misstatements in the report.
What are the procedures related to internal audits?
- Defining the Scope of Internal Audit. Drafting the Risk Assessment Matrix: Risk Assessment Matrix (RAM) is used to define the category of risk of each process and sub-process under the scope of the audit. The level of risk is defined, considering the probability against the category.
- Risk-based Internal Audit Plan: A detailed Audit plan will be drafted after discussion with the management and also areas to be prioritized depending upon the risk category and the nature of the function. Broad finance areas that have to be covered are: –
- Statutory Compliance
- Procurement of Goods/ Services
- Fixed Assets
- Information Technology Infrastructure.
- Admin & general Operations, etc.
- Execution of approved Internal Audit Plan: On Approval of the Audit plan, fieldwork is executed by performing walk-through, inquiry, questionnaire, etc. Clients are informed about the audit process and also the status of the audit.
- Submission of Draft: Once the execution stage has been performed, all the observations are collected in a draft report. The risk rating is allotted to the observations with the responsibility of any concerned function. This report is then discussed with the management or the Authorized officials to highlight the issues, concerns, and its deviations.
- Submission of the final report: As it is a continuous process, the scope does not end just with the submission of reports. The follow-up action taken report (ATR) is then presented to the management considering the status of observations and its closure status. Any pending observations that might be critical to the business are brought to the notice of the management for setting the further course of action.
Thus, internal audit plays a significant role in improving the efficiency and as well as the effectiveness of the company’s processes.