Internal auditors are a group of people who perform independent and impartial reviews of systems, business processes, and organizations. Internal Audit provides objective information on the organization’s risk and control environment, operations effectiveness, compliance with laws, regulations, and senior leaders.
Internal audit refers to reviews performed by Internal Audit. An internal audit in Dubai and UAE is used to evaluate the performance of an organization and execute a process according to various standards, policies, or metrics. The audits may involve the evaluation of internal controls regarding corporate governance, financial reporting, and accounting.
Internal audits may also entail assessing the efficiency of critical business operations such as supply chain management. Internal auditors are people who specialize in Internal Audit. internal audit services Dubai specialists may work in any area of an organization or specialize depending on their abilities.
Types of Internal Audit
Here are the different types of internal audit:
- Compliance Audit
- Environmental Audit
- Information Technology Audit
- Operational Audit
- Performance Audit
These are used to assess compliance with laws and regulations. These regulations can have a significant impact on a company’s financial health. Compliance with specific laws such as the Foreign Corrupt Practices Act or General Data Protection Regulations can lead to hefty fines and a company being unable to do business in certain nations. Here is a link to a beginner’s guide to GDPR.
They assess the environmental impact of company operations. They can also determine compliance with environmental laws.
Information Technology Audit
These audit types evaluate information systems and their infrastructure to ensure the accuracy, security, confidentiality, and privacy of customer information and intellectual properties. These audits usually include assessing IT controls related to logical accessibility, change management, system operations, backup, and recovery.
These assess the reliability and effectiveness of control mechanisms within an organization.
They are used to assess whether an organization meets the requirements set by management to achieve the Board of directors’ goals.
Internal Audit Process
An internal audit normally includes four stages of operations, including planning, fieldwork, reporting, and follow-up. Let’s have a look at the process below:
- Planning: This is where the internal audit team plans the Audit. They will examine industry standards and laws and provide guidance. Examine the audit results from previous years. The audit budget should be established and a timeline. Identify the process owners, and arrange a kick-off meeting.
- Fieldwork: This refers to the actual act of auditing. During this phase, the audit team will execute the audit plan. The audit team will execute the plan through interviews with key personnel, review of documents and artifacts, and testing control over time.
- Reporting: This is when the internal Audit will prepare an audit report. The report must be clear and concise to avoid misinterpretation. This will encourage people to read the report and understand it. These findings should be accompanied by actionable recommendations and steps to improve the process. You will need to work with management to draft an internal audit report. After reviewing it, you will then distribute the final report.
- Follow-up: This is the last stage that is often overlooked and forgotten. Follow-up is essential to ensure that all recommendations are implemented to address identified findings. Follow-up should be done with process owners to implement the recommendations. The Board should also monitor the company’s progress in addressing internal audit findings. If they don’t do this, it is unlikely that an organization will follow the recommendations.
Who Conducts the Audit?
- Internal Audits – Internal Auditors are often employees of the company.
- External Audits – Typically, external auditors are CPA firms in Dubai and UAE
What is the Audit Coverage?
- Internal Audits – Internal Controls related
- Risk Management
- Process Improvement
- External Audits – Financial reports and internal controls related to financial reporting
Why Audit is Important?
- Internal Audits: To improve governance, risk management, and control over critical processes. Information and assurance to the Board and management regarding their duties.
- External Audits: To verify or give reasonable assurance about the material accuracy of financial reports sent by an organization to its stakeholders.
Also read : What is Continuous Internal Audit?
What Are the Results of an Audit?
Internal Audits may report at any frequency the board designs.
As you can see, there is a difference between an internal and external audit. Both are used to ensure that certain activities and controls are appropriately performed. Both internal and external audits are internally reported. External audits are sent to all employees. Each covers the same area.
Thus, we prefer to refer to an internal audit as a pre-test and external audits as the final. A Dubai, UAE company can use its internal audit results to identify weaknesses and then improve them. The results of an external audit will be made public.
Understanding an Internal Audit
Public-traded companies in Dubai and the UAE are now legally responsible for their internal controls and financial statements. Internal Audits can be relied upon by executives to reach their conclusions. Internal Audits can assist in identifying and fixing problems in internal controls. This will help protect against fraud, abuse, and compliance with regulations.
Also read: Internal Audit Checklist For Company
The Importance of Internal Audit Function in an Entity in Dubai, UAE
Internal Audit is technically a cost center in a company and does not generate any revenue. A practical internal audit function is essential for any company to survive and succeed. External auditors don’t have the same capabilities as internal auditors. They go beyond financial reporting risks and look at broader issues such as an organization’s reputation, its efficiency and impact on society, and how it treats its staff.
Hire a Top Audit Firm in Dubai
Hopefully, this guide has helped you to understand the role of Internal Audit better. This will help you avoid common pitfalls that fail internal audits. Audit services in Dubai can help you meet your compliance requirements. Reach out to us for more information.
Umapathy Anuruthan, is a Senior Auditor at the firm, holds a Business Management Degree and carries with him an experience of 6+ Years, having worked in two of the Big 4 audit firms. He has a ‘hands-on’ understanding of external audits and financial reporting and is well-known for his approach to ensuring the highest quality and accuracy in audits for clients of numerous industries.