Internal Audit



Internal Audit

Internal audits are performed to systematically review how internal controls, operations, risk management, and the levels of compliance with legislation take place within an organization, with no links to the company’s financial statements like statutory audits.

An internal audit is a broader review of how well a business operates, manages risks, and complies with legal or regulatory requirements. Internal Audits are a key component in improving Governance, safeguarding assets from fraud, and improving the performance and efficiency of a business.

Types of Internal Audits

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Operational Audit

  • Evaluates operational efficiency and performance of processes used by an organization.
  • Assesses use of resources (manpower, time, capital) and identifies ways to improve and streamline performance.
  • Helps eliminate bottlenecks, improve productivity, and increase efficiency.

Compliance Audit

  • Evaluates an entity's compliance with laws, regulations, and internal policies.
  • Ensures organizations in regulated sectors (finance, healthcare, manufacturing) avoid fines and reputational damage.

Financial Audit

  • Determines if financial transactions are accurately recorded and financial records are reliable.
  • Ensures adherence to accounting standards such as GAAP and IFRS.
  • Helps identify errors, misstatements, or fraudulent activities.

IT / Cyber Security Audits

  • Examines IT environment and cybersecurity controls to prevent cyber threats, breaches, and vulnerabilities.
  • Ensures protection of organizational data and information systems.

Environmental, Forensic, and Performance Audits

  • Environmental audits ensure compliance with sustainability practices and environmental laws.
  • Forensic audits assess possible fraud or misconduct.
  • Performance audits review effectiveness in achieving strategic objectives.

Internal Audit Process

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The internal audit process is basically a spiral consisting of planning, performing fieldwork, reporting, and following up.

  • Planning: Determine audit scope, identify major risks, and draft an audit program.
  • Fieldwork: Conduct interviews, document reviews, sample testing, and internal control evaluation.
  • Reporting: Compile formal report outlining observations, risk areas, and recommendations.
  • Follow-up: Verify corrective actions have been implemented and gaps addressed.

Benefits of Internal Audits

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Internal audits are an essential tool for management as they enhance operational effectiveness, deepen risk management, improve internal controls, and facilitate compliance.

They ensure accurate financial reporting, protect assets, and detect fraud and operational weaknesses early. Internal audits promote transparency, accountability, and help organizations achieve strategic objectives.

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