Various Functions of Internal Audit in Financial sector

A periodic Internal audit is required to watch the financial system of control and procedures. An excellent internal audit process helps the management within the effective discharge of its responsibilities. It reassures them of the bank’s danger and operational performance and supports the quantity and value of its transactions. Every bank should conduct an indoor audit to fulfil its responsibilities and to realize its objectives.

Internal Audits acts as a watchdog for financial industries. They are entrusted with inspecting the organization’s financial reports and audit the working techniques free of the board. So an internal audit focuses on significant business hazards, the executive’s capacities, security measures and administrative consistency among different divisions. An internal audit is basically a pre-emptive move to keep up operational proficiency and monetary unwavering quality and shield resources. It gives autonomous confirmation that an association’s danger to the board, administration and inside control measures work viably.

General Functions of Internal Audit for Financial Management

Flexibility in the Audit Plan 

Internal audit works with the audit plan drafted by the audit team in consultation with the management. This audit plan incorporates the circumstance and recurrence of the internal audit work to be continued, and it depends on control risk assessment. Risk evaluation analyses all financial activities and internal control systems, which shows the likely level of risk present in these exercises. The audit plan should be practical and should consider future anticipated advancements. It must be realistic and will take into consideration future developments and expected innovations. The plan should cover the resources required for completing the audit activities in terms of personnel and other resources. Such an audit plan established by the audit team has got to be approved by the financial management.

Audit Procedure

The destinations outlined in the audit plan are accomplished through an audit review program that records the strategy to be completed for every particular audit region. These procedures are adapted consistent with the risks identified in every process across the financial operations. The worth and volume of the banking transactions and the samples are selected to be audited in each of the core areas. Audit samples should even be determined on a random basis in certain areas, exposing all the related risk. Listed below are a number of the important places to be covered in any of the internal financial audits:

  • Loan:This is the foremost important division in banking services. Various sorts of loans and cash credits are given to customers. These got to be checked for necessary documentation and approvals. Checking the loan repayment schedules and examining the reported non-performing assets is additionally required.
  • Cash Transactions:The deposits and withdrawals made, got to be tracked. Further, surprise verification of the cash balance on a specific day must be initiated.
  • Additional Charges: Analysing if all charges for various banks’ services are collected from the purchasers per the top office circulars is required. If there are any revenue leakages, they should be reported.
  • Other Services: Other financial business administrations, for example, quick cash moves, the credit extension followed and significantly more ought to be guaranteed to be set up. This must be completed with required endorsements, documentation, and so on.  

All the audit procedures administered by the interior audit staff must be documented in working papers during a well-determined method. Such working papers must list out the activities performed in checking the transactions alongside the sampling details.

Audit Report

A composed audit report is drafted for every department, and therefore, the executive summary is taken for discussion with the senior management. The audit report contains the audit’s scope and purpose alongside the findings and, therefore, the banks (auditee’s) response. It likewise gives the significance of the insufficiencies found and related suggestions to the administration to alleviate/lessen the related danger. Senior administration guarantees the review concerns are tended to like manner, and recommendations made are carried out on a convenient premise. The inner review group watches that the past reviews’ proposals are carried out and clung to in the following audit.

In the End!!!

Internal Audits improve the financial sector’s execution and is a systematic methodology for achieving the association’s necessary change. It can likewise end up being a pointless cycle that the organization needs to go through and may not receive any rewards if not done right.

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