What It Internal Audit & Why It Matters?

Internal Audit. Objectives & Scope

What is Internal Audit?

Internal audits evaluate a company’s internal controls. Internal auditors are hired by companies who work on behalf of their management teams. These audits also provide management with the tools necessary to attain operational efficiency by identifying problems and correcting lapses before they are discovered in an external audit.

Internal audits are conducted through planning, auditing, reporting, and monitoring steps. Internal audits may enhance the efficiency of operations, and motivate employees to adhere to company policy.

In addition to ensuring that a company complies with laws and regulations, internal audits also provide a degree of risk management and safeguard against potential fraud, waste, or abuse. The results of internal audits provide management with suggestions for improvements to current processes not functioning as intended, which may include information technology systems as well as supply-chain management.

In short internal audit is defined in 3 parts;

  1. What is the process
  2. What is the risk involved in the process?
  3. What are the controls for addressing those risks?

What are the objectives?

  • To evaluate the company’s internal controls;
  • To ensure complete/adequate compliance with laws, rules and regulations;
  • To evaluate the risk management system;
  • To establish better procedures and policies;
  • To protect the interest of the shareholders;
  • To ensure integrity and accountability; etc.

Where does it goes? The Scope

Notably, the scope of internal audit is not prescribed under the Companies Act, 2013 or rules made thereunder. However, as per rule 13(2) of the Companies (Accounts) Rules, 2014, the audit committee of the company/ board together with the internal auditor will formulate the scope, periodicity, functioning and methodology for conducting the internal audit of the company. 


In essence, internal audit serves as the vanguard of organizational integrity, diligently safeguarding against risks, ensuring compliance, and propelling operational excellence. By embracing the principles and practices of internal audit, businesses can fortify their foundations, navigate complexities, and chart a course towards sustainable growth and resilience.

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