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All you need to know about internal audit tasks

internal audit tasks مهام المراجعة الداخلية

In 1929, the international markets experienced a global economic crisis that led to the bankruptcy of many companies and projects worldwide. Many economists studied the reasons behind this global financial crisis. They discovered that the lack of an internal control system was one of the main reasons for this unexpected event

Since then, internal audit has become one of the most critical accounting tasks in companies. It could be defined as the accurate and integrated examination and review of all documents, data and registers owned by the company and all the related documents, data and books through economical and organised inspection methods to ensure their correctness and faultlessness to ultimately issue a commonly agreed-upon technical evaluation represented in the internal audit report form

Internal audit is also the tool used by the company’s management to perform many tasks. Among the most critical internal audit tasks in companies comes the following

Apply internal and full audit to all its accounts

Helps them discover their faulty calculations, review and correct them

Quickly detect embezzlement and fraud

Ensure the correct application of the rules set by management in the company’s regulations and the extent of their implementation

Evaluating and examining the performance of the company’s operational and production activities

Internal audit tasks

Difference between internal audit and internal control tasks

Before starting a detailed review of internal audit tasks, please note that there is a difference between the internal control system and the internal audit. The internal control system is one of the preventive tools companies use to prevent accounting errors, embezzlement or administrative fraud, whether intentional or nonintentional

While internal audit in companies is an interference process that is used to handle and review what has been disclosed by the internal control audit personnel of the company, the employee responsible for implementing the internal control system is entirely different from the chartered accountant responsible for carrying out internal audit tasks

Internal audit tasks

Internal Auditor and Financial Audit tasks

Examine and check income and expense documents and confirm their validity
Review accounting restrictions and posting and ensure the correct recording of amounts of money spent
Examine fund documents and registers, ascertain the inventory work results, and implement it according to established regulations
Evaluate the warehouse registry and ensure the integrity of the inventory process
Review and examine all accounts, final statements, and the validity of the results of financial reports

Internal audit tasks in achieving compliance

Ensure that all operations, accounts and all, departments and employees are conducted by the policies and rules established within the company and comply with global accounting rules
Check all contracts and agreements signed by the company during a specific period to ensure that everything was done as agreed upon
Review complaints submitted to the administration regarding any financial or administrative violations
Carrying out sudden campaigns to inspect all departments to ensure compliance with regulations

Internal audit of performance

Evaluating the effectiveness of the internal control system and the accounting system applied in the company. Also, specify their shortcomings and deficiencies
Evaluate the company's organizational structure and its application. Monitor the goals achieved by departments and identify the aspects related to weaknesses and strengths
Identify ways to optimize the use of human and material resources

The role of internal audit in advisory functions

One of the most critical tasks of internal auditors in companies is to provide a technical opinion concerning developing a general budget plan
Strengthen the concept of internal control among the company's employees and departments
Provide supporting recommendations for employees to increase their efficiency in accomplishing tasks
Provide a technical opinion about the operations, contracts and the future contracts the company will sign to ensure that they are by its capabilities

The role of internal audit in fraud

Weak internal control systems and internal audit of any company leads to the spread of corruption and fraud crimes. Therefore, the main objectives of the internal audit include the following
Protect company assets from misuse or manipulation
Monitor methods of using assets to protect and preserve them
Ensure the validity and accuracy of each issue recorded in the books
Define responsibilities and authorities
Good use of material and human resources
Facilitate administrative procedures to achieve stable and flexible work processes

The difference between internal audit and external audit

The external audit is an objective and organised process that aims to obtain evidence and use it to evaluate the company’s financial operations and events and match them with its plans to give neutral reports submitted to decision-makers, managers, investors and all to whom it may concern
From the definition, it is clear that there is a significant difference between the role of internal audit and the external audit role of the company, but let us first learn about how they are similar

Similarities between internal audit and external audit

The two types aim to ensure that the company’s internal control is activated and that the company’s funds are not subject to any embezzlement or losses

The two types enhance the existence of the unified accounting system with the utmost effectiveness to help strengthen the integrity and correctness of the preparation of financial statements and reports

The relationship between them is mutual and reliable. For example, the external auditor relies most of the time on the internal auditor’s reports concerning internal control systems. In contrast, the internal auditor relies on the external auditor’s report and neutral opinion on the financial statements

Differences between internal audit and external audit

Review objective

The internal auditor aims to ensure the integrity of management. The external auditor aims to prepare reports confirming or denying the conformity of his examination with the financial statements and accounts and expressing his opinion on them.

Who are interested in the internal and the external reports

The internal auditor report form serves the company's management only. In contrast, the external auditor's report helps anyone interested in accounting information related to the company, such as shareholders, current and expected investors, government bodies, tax authorities, and others.

Scope of work

The department determines the scope of work of the internal auditor. In contrast, the scope of work of the external auditor complies with the external audit regulations, which define the duties, rights and scope of work of all external auditors

Independence

Internal audit, although it is an independent department, exists within the company and is subject to the authority of management, which may affect its opinion and make its degree of independence significantly lower than an external audit since its representative is a chartered accountant who is entirely independent of the company appointed by the Board of directors. It has n sort of relationship with the company's employees and is, therefore, more neutral and independent

Planning the internal audit process

The internal auditor prepares a written annual plan approved by the company’s board of directors, including the company’s objectives, the scope of work, timing and resources.

The general objectives of the company, the activity to be reviewed and the means used for internal control are taken into account

The potential risks of the activity must be considered, especially with companies operating within the industrial and real estate business sector, such as construction companies

The tasks of the internal auditor shall be determined in advance before starting the audit process and identify the files and documents on which his work will be based

Identify the employees who will perform the internal audit process and the time required to perform their tasks

Objectives and responsibilities of internal audit

Internal Audit Services executed by ECPA

ECPA is one of Egypt’s most prominent accounting offices and the Middle East. It provides an expert team consisting of the best consultants, chartered accountants and tax accountants. Our office is honoured to offer many internal and external audit services, including

Analytical studies of your activity

Review of planning the review process

Prepare a system of financial statements, cash flows and financial reports

Compliance with your company regulations and laws within the objectives of the company’s general plan

Study the problems your company faces and the effects they may cause

Providing legal advice, accounting advice and tax advice

Designing the internal audit program to suit the nature of your business

Designing an accounting program consisting of several different accounting software, store management software, CRM customer management software, human resources program, production planning programs and others

Issuing internal audit reports that are impartial and compliant with the prevailing laws

Review your company’s final accounts and match them with records.

Checking the financial statements and verifying the assets of the company

We also provide many accounting services, taxes, social insurance and feasibility studies

Get in touch with us to stay informed about our most essential services. Call now to schedule your first free consultation

our team - Amr Farag

Executive Partner - Planning and development of internal control systems

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