Internal Audit Mechanism - Need of an Hour

Mr. John a businessman running a company comes to know about Internal Audit Mechanism from one of his business friend who has implemented it in his company. Now Mr. John is perplexed thinking about the Internal Audit Mechanism and whether he should implement such a mechanism in his company too. He approaches Emirates Group of Chartered Accountants and raises his questions and concerns to Mr. Praveen- one of the Internal Audit Manager of Emirates Group of Chartered Accountants. Detailed conversation between Mr.John and Mr.Praveen on Internal Audit Mechanism is as follows:- Mr.John: - Hello Mr. Praveen Mr.Praveen: - Hello Mr. John Mr.John: - I run a company and I am having few questions and concerns regarding Internal Audit Mechanism. Mr.Praveen: - I will be glad to answer your questions on Internal Audit Mechanism. You may feel comfortable asking them. Mr. John: - What is Internal Audit mechanism; can you please brief me about it? Mr.Praveen: - As per Institute of Internal Auditors (IIA)- USA, Internal Audit Mechanism is an independent, objective assurance and consulting activity designed to add value and improve an organizations operation. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. In short Internal Audit Mechanism works on implementing, testing and evaluating the effectiveness and efficiency of Internal Controls and identifying the Internal Weakness in one's organization. Internal Audit basically has two main objectives:- 1. To ensure that internal control and risk management system are continually being improved and optimized in response to ever-changing business environment 2. To provide reasonable assurance to the management that significant risk in the organization are being managed appropriately Mr .John: - What are Internal Controls and Internal control weakness? Mr. Praveen: - Internal controls are the business practice, policies, process designed,implemented and maintained by the management or by those charged with governance of the company.When one or more of a company’s Internal Control put in place to prevent significant irregularities is not working effectively and has become ineffective in preventing the risk then that is known as Internal control weakness. Mr. John: - Why is Internal Audit Mechanism Important for any organization? Mr.Praveen: - Success of any business entity lies in the effective implementation of the process and policies which are designed to achieve the basic organizational objectives and goals i.e. maximization of wealth and profits. Any defect and failure of such policies and process in design, implementation and review may end up in non-achievement of organizational objectives and goals, which indeed will lead to failure of business in long run. Internal Audit Mechanism ensures that these policies, procedures, and process are incommensurate with the business needs and are designed, implemented and reviewed for its efficiency and effectiveness as per the changing internal and external business environment. Mr .John: - Apart from identifying and testing controls, are there any other areas covered by Internal Audit mechanism? Mr. Praveen: - Traditionally Internal Audit is used to review the internal controls but with the changing dynamics of business the scope of Internal Audit has increased manifold, the Internal Auditor not just only audit the traditional aspect but also act as an advisor and a professional guide to the management. Some of the diverse areas covered by the Modern Internal Audit Mechanism are:- 1. Cost Reduction Mechanism 2. Business risk analyzer 3. Proactive auditing system 4. Business due diligence at the time of mergers and acquisitions 5. Business and operational aspect 6. People management and review 7. Compliance checker 8. Consulting - Fraud and error, ERP/SAP implementation Mr.John: - Are there any other companies in Dubai which have devised Internal Audit Mechanism? Mr.Praveen: - As the business environment in UAE and especially in Dubai is becoming more and more complex and competitive day by day; various multinational and local companies have realized that they have to implement an Internal Audit Mechanism to mitigate the various business risk like control failures, frauds, and error. Now there is a surge across UAE in the implementation of Internal Audit Mechanism and more and more company are implementing the same for their organization. Mr.John: - How can Emirates Chartered Accountant Group help me? Mr.Praveen: - If no effective Internal controls are in place:- We are a pioneer in the field of Internal Audit and our dedicated team of professionals can design, develop and implement an effective internal control for your organization (in case if you don’t have any). Also, our dedicated team can periodically review whether all the Internal controls are in place and are working effectively and efficiently as per the needs of your business. If internal controls are in place:- If your company has already placed an Internal Controls mechanism, our team can do an extensive test of controls and come up with the Internal Control weakness if any and devise an effective Internal Control mechanism which will be suitable for your organization in achieving its business objectives. Other diverse Areas of Internal Audit Mechanism We have a dedicated team of Professional experts which keeps themselves updated with the requirement of changing times. They act as expert,advisor,analyst,implementor to various companies across UAE in diverse areas. Mr. John: - Thank you Mr. Praveen for elucidating the concept of Internal Audit mechanism and I would be glad to implement the same in my company. Mr.Praveen: - It is my pleasure, Mr. John.