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Unit 6: Internal and External Audit




              The assets of the company are properly recorded and sufficient measures have been taken  Notes
               to safeguard it.

              Operational results of the company are as per the fixed target and objectives.
                                   Figure 6.1:  Internal  Audit  Process





























          The complexity and increasing size of entities has drastically increased the importance of the
          role of internal auditor. The significance of internal audit is growing day by day. Historically,
          internal audit was mostly confine to ensure that the accounting and allied records have been
          properly maintained, the assets management system is in place in order to safeguard the assets
          and also to see whether standing policies and procedures are duly complied with. But with the
          passage  of time, the objectives of internal audit have been significantly  changed. Now cost
          benefit analysis, resources utilization and their proper deployment, effectiveness of management
          decisions etc. are also being reviewed by the internal auditor.



             Did u know?  Internal Audit was  introduced in 1954 and  after  the audit of receipt was
             entrusted with Comptroller & Auditor General  of India in the year 1960, the scope  of
             duties of Internal Audit were made co-extensive with that of statutory Audit.
          Briefly, the objects of internal audit may be described as follows:

          1.   Evaluation of business control system: Internal audit is concerned with ensuring effective
               and efficient system of accounting control, standard cost control, budgetary control and
               other functional control.
          2.   Compliance with standard policies and procedures: Reporting to management about the
               compliance  of standard  policies and procedures is  an important  objective of internal
               audit. For example, suppose company’s standing policy is that any purchase order worth
               more than TZS 4,000,000 cannot be awarded without asking quotation from at least three
               parties. If  internal auditor found that this has  not been strictly followed then he must
               report those cases to the management.





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