Internal audit is a function that provides independent and objective assurance that an organization’s internal control and risk management system are functioning effectively whereas internal control is the system implemented by a company to ensure the integrity of financial and accounting information.
Internal control is a system that comprise of measures, policies and procedures which help an organization in achieving business objectives. An internal audit is an activity performed by professionals auditing firms in Dubai to ensure that the internal control system implemented in the organization is effective.
Objectives of internal control
- Examining whether the transactions are executed as per the management’s authorization;
- Checking prompt recording of transactions, the correct amount and the accounting period to which it belongs;
- Ascertain that assets are protected from unauthorized access and use;
- Comparing recorded assets with the existing ones, at various time intervals and taking actions in case differences are discovered
Objectives of internal audit
- To check the accuracy and authenticity of the accounting records, which are reported to those charged with governance.
- To identify whether the standard accounting practices which are deemed to be pursued by the entity are complied with or not.
- To ensure detection and prevention of fraud
- examination of appropriate authority for the procurement and disposal of assets.
- To verify that the liabilities are incurred only for business causes and not for any other purposes.
- To review the activities of internal control system so as to report manage regarding deviations and noncompliance.
Key differences between internal audit and internal control
- Internal Audit is the frequent or ongoing audit conducted by an organization’s own personnel. The Internal Auditor primarily monitors operational results, verifies financial records, ‘evaluates’ internal controls, and assists with enhancing the efficiency and effectiveness of operations.
- Internal Auditors work on the basis of objectivity i.e. they strive as far as possible to reduce or eliminate bias and prejudice, or conduct subjective evaluation by relying on verifiable data.
- In terms of Internal Control, its role is to examine the adequacy and effectiveness of internal controls processes and make recommendations where improvements are needed.
- Since Internal Audit should remain independent and objective, Internal Audit does not have responsibility for developing or maintaining internal controls. It is the role of management to implement the policies adopted by the Board or the Chief Executive and to identify, evaluate, avoid or mitigate and control the risks the organization could face in achieving its objectives.
- However, the effectiveness of Internal Control is enhanced through the review process performed by Internal Audit and the recommendations made for improvement.
- Internal Control on the other hand is one of the core business processes. An internal control system is an integral part of an organization’s financial and business policies that control the strategic, financial and operational procedures of an organization. The process is based upon a system of management information, financial regulations, administrative procedures and a system of accountability.
- Internal control and risk management embody a critical business discipline that calls for an organization to identify all the risks they face, decide which risks need to be actively managed and put a plan of action in place i.e. controls, in order to mitigate the risk.
Internal control and risk management are often described as two sides of the same coin.
- There is a view that an organization could live without internal audit but could not survive long without effective internal controls.
- There can be no doubt that both Internal Audit and Internal Control add value and improve an organization’s operations, albeit in different ways.
Certified internal Auditors in Dubai
When it comes to internal audit, take the help of experts. There are several certified auditors in Dubai, but for an effective audit, you need to hire seasoned and intelligent auditors to track the financial status and internal control processes of your company.
A firm with certified internal auditors in Dubai provides quality and reliable services to clients. If you have questions on audit in UAE, you can know more about the process with the help of experts approved auditors.
Muhammad Farahat has worked extensively with SMEs and corporations on a variety of compliance issues. Since the introduction of VAT in the UAE, He provides expert assistance on auditing & accounting, VAT health reviews. With his work in taxation, he is extremely experienced with navigating complexities in tax reporting.