There is no doubt that businesses are seeing new heights in India right now. India has emerged as the fastest-growing major economy in the world as per the Central Statistics Organization (CSO) and International Monetary Fund (IMF). India’s GDP is estimated to have increased 6.6 percent in 2017-18 and is expected to grow 7.3 percent in 2018-19*.
While several factors contribute towards the success of businesses ranging from favorable government policies to right people being part of organizations to standardized business practices, one such practice that is highly recommended is getting an internal audit on a regular basis. Over the years, several organizations have used it as an instrument to maintain and enhance the quality of their goods or services to meet customer expectation. If your organization does not have an internal audit function, then it is a worthwhile option to think about.
Why should you consider internal audit for your business?
Well, an internal audit function forces you to have a deeper look into your business processes and finances to ensure that they are in proper order and also are there any emerging risks that business should address or not. While it is very normal for the management to be complacent and think that everything is running smoothly and is in proper order but there might be a case where, by the time you realize that it was not true, it’s too late.
In today’s volatile business environment, where businesses are facing a new challenge every day than whether it be in form of change in government regulation or new operational regulations like GDPR or change in labour related compliances or change in consumer expectation etc. An internal audit function always ensures that businesses are meeting their responsibilities and that the organization’s staff is also working towards organization’s goal.
How can an internal audit help business?
Whether you have a BPO or Manufacturing Facility, an internal audit can help as follow:
Help identify any financial discrepancies – All of us will unanimously agree to the fact that the main objective to undertake an internal audit is to look deeply into financial transactions and records of the company, to rule out the possibility of any malpractice by any person or group of individuals. An internal audit may help you spot duplicate posting of same purchase invoice or identify any dummy vendor or employee in the system, among many other malpractices which might be prevalent right under your nose.
Ensuring adherence to standard operating procedures – Well there is no doubt on the fact that management of any organization lays high emphasis on the adherence of Standard Operating Procedures by its staff, and would like to identify instances where such policies or procedures are being by-passed by its employees. An internal audit function can not only help you to ensure compliance of such policies & procedures, remind the staff of its importance if they are not but can also assist in updating the procedure or benchmarking them with industrial practices.
Help attain Economies – Another great output which business can generate by using internal audit function is to attain economy of scale in every business process. A good internal audit function will show you where you need to invest more in resources and where resources are lying idle or are being under-utilized. It will also help in identifying any redundant exercise which is being performed in any process, which is adversely impacting the working capital of the company.
Ensuring business is fully compliant – Another grave area for the management of any company is to be sure that they are fully compliant with all the legal and regulatory requirements of the land where they are operating. With so many laws ranging from company structure to tax compliances to labor welfare to industrial requirements, it is very difficult for any company to be sure that at any point of time that they are fully compliant to all these requirements. This is where an internal audit function can help you to be certain that your company is adhering to all the laws applicable.
Greater Coverage – Many times, you come across the remark from business owners that “why should we have an internal audit, while we already have a statutory audit in the company”. Well, I have always told them that the scope of the statutory audit is restricted to financial statements of the organization, while through internal audit, you can get those areas audited where you have concerns over and use it in a way you want to. Thus, you are always in command and can amend the scope of the audit as per the changing the environment of business.
How to Effectively Deploy Internal Audit
In certain cases, we have also seen while businesses see internal audit as a great tool but don’t exactly know how to use it. Well, I totally understand the situation if you have never got it done in the past. In such a situation, I generally advise companies to outsource it to an external professional firm or to hire some expert who has experience of performing it.
To conclude I would like to say that an internal audit is a fantastic tool to not only help business prosper but can also help in identifying new opportunities. Not only will it ensure that you are working in a best possible manner, but will also help you grow in future by identifying emerging risks and opportunities.
Happy Auditing!!!
*Source: https://www.ibef.org/economy/indian-economy-overview (Last accessed on 07th June 2018)
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