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This page provides you with the most important information you need to know about the stages of internal auditing. We will also discuss the role of internal auditing in ensuring businesses meet financial and accounting compliance requirements.

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What is internal audit and what is its importance?

An internal audit is an examination of an organization’s operations to assess their efficiency and ensure compliance with internal policies and external regulations. This process is performed by internal auditors, typically working within the organization itself, and aims to improve the organization’s operations, enhance the effectiveness of risk management, ensure information security, and ensure efficient resource management.

The importance of internal auditing for companies

Internal auditing is one of the most important tools through which companies can verify the accuracy of their data and accounting records, detect deficiencies and shortcomings, and work to improve them in accordance with internal audit best practices. Furthermore, the role and importance of internal auditing extends to the following aspects:

• Increase productivity through continuous monitoring and periodic review.
• Protecting the company’s assets and funds from risks by detecting fraud and manipulation .
• Discovering shortcomings in the company’s operations and transactions, and working to improve and develop them.
• Enhance the company’s organizational values ​​and increase its operational efficiency.
• Enhancing the confidence of shareholders and investors in the company by demonstrating the management’s competence in organizing its operations and transactions.
• Ensuring good corporate governance to ensure compliance with laws and regulations and maintain operational efficiency.

Types of internal audit

First: Operational audit

An operational audit essentially examines whether a company’s internal regulations and controls are operating at optimal efficiency, and whether it is using its resources to achieve its objectives or depleting them without proper planning.

Second: Financial audit

Financial auditing detects errors in accounting matters, operations, and financial transactions and works to address them to ensure their accuracy and compliance with auditing and accounting standards in force in the United Arab Emirates.

Third: Building Audit

It is an audit that specializes in monitoring the company’s capital projects and measuring their financial development.

Fourth: Information systems auditing

An information systems audit is based on a comprehensive review of the company’s information systems and the introduction of new electronic systems that are more efficient and appropriate to the company’s business and activities.

Fifth: Compliance audit

Compliance auditing ensures and verifies a company’s compliance with the laws and regulations governing work in the United Arab Emirates.

Also browse: How is the performance of the internal audit unit evaluated in companies?

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Internal audit stages

 

Despite the multiple types of internal audits discussed above, and the auditor’s role within each, they all rely on fundamental stages, beginning with carefully planned audit planning and ending with the drafting of simplified reports. Let’s explore the stages of internal auditing together.

First – Planning stage

The planning phase is the first stage of the internal audit process, in which the auditor begins by defining the process requirements, the desired objectives, and the expected timeline for completing the audit process. This phase also includes the implementation of the following tasks:

1. Deliver the review notice to the department heads in the company.
2. Organize a pre-review meeting.
3. Meeting with department staff.
4. Review the company’s procedures and policies.
5. Conduct a risk assessment.
6. Identify the elements subject to the internal audit process.
7. Understanding the nature of the company’s business operations.

The planning phase then concludes with the audit team preparing a detailed plan for the various types of audits to be conducted, after which the fieldwork phase begins.

Second: Field work stage

After the auditor has completed the first phase, he must begin field work, which represents the second phase of the internal audit process. This phase includes the following tasks:

1. Discuss the nature of the transactions and business operations subject to audit and the company’s internal control procedures.
2. Preparing a preliminary report regarding the tasks completed by the auditor, which are determined as follows:

• Transaction matching.
• Physical inventory.
• Follow up financial accounts.
• Review company performance charts.

Third: The stage of preparing audit reports

The report preparation procedures go through the following main steps:

1. Draft the initial report.
2. Discuss the initial draft report with the management of the relevant department within the company to properly assess the report’s findings and exclude some findings to make it more focused and objective.
3. Preparing the final report after reviewing the amendments and exceptions that were discussed.
4. The report outlines the audit team’s findings, proposed changes to improve monitoring and performance processes, and future implications.
5. Distributing the final report to the company’s board members and department heads.

Audit reports include a summary of the procedures and methods used to complete the audit, a description of the audit results, and recommendations for improving internal controls and oversight procedures. They may also include an explanation of the steps to be followed, future monitoring and review processes, and their results.

Fourth: Monitoring stage

After the final report is prepared and distributed to the company’s board members, the limited monitoring or auditing phase begins. This phase is primarily based on setting a specific timeframe for evaluating the company’s performance in light of the proposed changes.

Internal Audit Services from Farhat & Partners

Farhat & Co. is one of the leading providers of internal audit consulting services in the UAE. With over 35 years of accounting and financial experience, we guarantee to help your business achieve its pre-defined goals and objectives and achieve further growth and prosperity.

Our internal audit services help you:

1. Reducing accounting errors and enhancing the integrity of financial and economic operations.
2. Detecting manipulation of accounts and financial statements.
3. Optimal use of company resources and evaluation of the effectiveness of the internal system and its controls.
4. Assessing potential risks that could impact business in the country.

Are you ready to begin your internal audit journey with Farhat & Partners? Simply contact us and ask any questions you may have.

Research and Studies Department
Farahat & Co.
Dubai, United Arab Emirates
For service inquiries:
WhatsApp (correspondence only): +971526922588
Email: sales@farahatco.com