Internal audits are essential for a business’s smooth operation, maintenance, and compliance with the Government’s laws and regulations. They safeguard the business from any errors or fraud, assist with risk management, and support strategic decision-making.
Internal audits are carried out by many companies more often, such as quarterly or semi-annually. This is done to investigate any hidden concerns, and potential dangers, and to provide management with timely information so they can resolve any problems and make informed decisions. In the UAE, regular audits are useful because of the country’s dynamic economic environment.
Understanding Internal Audit
What exactly is an internal audit, one wonders? Internal audits assess the internal controls, processes, and systems of a company or organization. They are carried out to assess the effectiveness of the business’s internal processes, protect its assets, and gauge its adherence to the laws that are upheld by the government.
In addition to identifying problems, the purpose of writing an internal audit report is to offer suggestions and workable solutions for any problems that may arise. Their objectives are to improve risk management, uphold accountability, transparency, and organizational excellence, and offer assistance in making strategic decisions.
Internal Audit Process
An internal audit plan or internal audit checklist generally consists of the following steps:
Planning
First and foremost, the internal audit team works on creating a comprehensive audit strategy and framework that specifies the goals, timetable and scope. Key areas including risk management, operational efficiency, compliance, and financial processes are also identified and methods are designed to collect the relevant information.
Data Collection
Auditors gather relevant data including financial records, policies, procedures and operational reports. They may need a Request List to assess certain documents that are crucial for the audit. They also conduct interviews with management officials to understand the procedure and identify any gaps within.
Documenting Findings
The findings are then documented and an initial report is formulated based on the evaluation.
Introducing the Results
After that, the management is shown the initial report, and comments and areas for improvement are reviewed. Problems are highlighted and effective solutions are considered.
Reporting
The results, tests, interviews, and procedures provided to address any inconsistencies or problems discovered are then compiled and presented in a final internal audit report.
Perfect Time To Conduct An Internal Audit
Before the company is scheduled for an external audit, it is best to undergo an internal audit. As a result, the internal audit will give it plenty of time to identify and address any problems with the systems and controls in the organization.
However there are other situations when conducting an Internal Audit in the UAE will prove beneficial.
On A Regular Basis
Organizations ought to routinely carry out internal audits. They are helpful in evaluating the company’s predicted and present financial situation, which improves the ability to decide on the company’s next projects and financial needs. This gives time to correct discrepancies in the financial records, if any found during the audit.
Cash Flow Issue
An internal audit is required when a company has a cash flow problem. There may be discrepancies between your predictions and the real situation, and not all profit estimations are reliable. However, an internal audit is necessary if the company’s profits are consistently declining. This can be due to external factors such as marketing but the issue could be internal as well. It can be some irrelevant practice that might be causing the failure of marketing campaigns resulting in declines or it can be a fraud as well. Thus internal audit will allow us to investigate these issues, find the root cause and take actions that improve financial health and operational efficiency of the organization.
Prior To Making Any New Investments
Investments are ingrained in corporate culture. A corporation needs to be in good standing in order to draw in good investors. Investors frequently consider the potential benefits of their investments. To assure them of this, the business must carry out internal audits to determine its financial status, giving prospective investors a better understanding of the ventures into which they are investing.
Discrepancies In UAE Accounts
As aforementioned there is a constant flow of money in the business. There are teams that manage and maintain records for the cash flow. There can be issues in the organization where either the cash reported is less or more and the numbers don’t match the exact amount. Conducting an internal audit in such case will prove fruitful. It will investigate whether the issue was a recording error or their was a fraud involved. Thus allowing management to act responsibly and immediately in terms of discrepancies in the cash flow.
In Case Of Leaving Or Joining Of Employees
When an employee joins or departs the organization, an internal audit can be useful. In the event that an employee leaves, internal audit has the ability to review the job, its responsibilities, the system it used, the task the employee completed, and the earnings generated. This aids in determining whether there was a particular problem with that function or system that would require fixing in order to increase productivity even further. Or if the worker was accountable for missing a crucial piece of information. Similar to this, internal auditing can assist in enhancing workflow and system performance in the event of a new hire.
Companies can also hire an external audit service provider for conducting an internal audit. There are multiple internal audit services in Dubai that an organization can benefit from to safeguard its policies.
Hence conducting internal audits at right times are beneficial for companies in general but more helpful for business in UAE due to its dynamic work environment and corporate culture. It will provide insights to the company’s issues, offer strategic solutions for problems and design & develop more efficient work systems that will enhance organizational health in terms of finances, productivity and compliance to government rules and regulations.
