Essay Example on Internal Audit Control Practices

Introduction

The internal auditing process involves using an independent party to examine the data, financial statements, the records of the accounts, and the different operations and performances of the organization to verify the authenticity and reliability of the reports made by the organizations. Through internal auditing, the organizations in question achieve value addition and improvement of the processes that the organization undertakes (Kidron et al., 2016).

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Operational Efficiency

Additionally, internal auditing assures an organization of operational efficiency and strict adherence to the organization's prescribed practices operationally, in management, and the financial aspects. The use of internal auditing comes as a prerequisite of the efficient organizational activities and the achievement of positive change from the different activities that the organization involves itself in. therefore, organizations must undertake different methods to ensure internal control through the auditing process, with the methods settled upon depending on the size of the organization and the nature of the business that the organization undertakes since there are demands laid on organizations based on those issues (Kidron et al., 2016).

The auditing process requires an independent auditor to review the financial reports given to them by the organizations they are auditing, collecting their evidence to agree with the reports, or resolving them and then making their independent reports based on the evidence collected. The reports made by the auditors are essential to the different stakeholders in the organization such as the shareholders, creditors, the government and the potential investors since it looks at the performance of the organizations in question, and directing them to act accordingly depending on the reports of the audit reports.

Performance of an Organization

The internal auditing process directly influences the performance of an organization. First, the process improves the performance of the organization. Organizations undertake different activities to ensure their achievement of the goals they have set. There is a possibility of the performance not being up to the standards set, resulting in failed projects. Through the reports from independent audits conducted on the organization, there is a high possibility that the organization will improve its performance whether or not the reports are positive (Groff et al., 2016). Suppose the reports from the auditing processes are positive.

In that case, the organization will keep up with the activities they had undertaken by investing in activities that will ensure the increased possibility of achieving the goals they have set for themselves. If the reports show a decline in performance and a failure to meet the set organizational goals, then the organization will look into the areas where they are failing and work on different processes that will assure them of the achievement of the goals that they have set for themselves.

Secondly, the auditing process exposes the risk factors that the organization faces in its endeavors. The risk factors are aspects of the business that negatively impact the outcomes of the business and threaten the overall well-being of the organization. Through the reports from the auditing processes, the organizations in question will likely see the areas that pose a threat to their performance, hence helping them improve them by giving those areas the attention they need (Raiborn et al., 2016).

Activities in Motion

In doing so, the organization will have put activities in motion that will help in the organization's overall performance since the organization will invest their time, effort, and finances into the elimination of the risk factors, which will, in turn, result in better performance. Determination of risk factors that the organization faces is also a meaningful way to predict the future risks that the organization may be exposed to and make the right preparations to overcome them.

The lack of preparation is one way for organizations to experience reduced performance since the changes affect the plans made in the organization, with the disruptions experienced leading to losses, which will be reflected in the internal audit reports. Using the information from the internal audits, the organization will be able to predict the areas that would require immediate attention to avoid any risk factors affecting the organization's general well-being.

The internal auditing process also helps the organization review the weaknesses that face the organization and the areas that are not working efficiently. Through the auditors' independent reports after the internal auditing process, the organizations being scrutinized are given an honest opinion on the areas of the organization that are working and those that require adjustment for them to continue working efficiently.

Ignoring the weaknesses of the organization may result in the organization being unable to achieve their goals. Instead of making profits, they may experience losses, leading to the businesses being closed (Raiborn et al., 2016). However, if the organizations use the feedback received from the independent auditing reports positively, they will see the areas that require immediate attention and work on providing working solutions, which will help them to produce efficient solutions.

Underperforming Processes

The weaknesses in the organization are mostly from the underperforming processes and activities in the different departments. Therefore, the weaknesses will expose the departments' weaknesses and the tasks they are supposed to undertake. When organizations explore the different aspects that lead to the organization's failure, they will come up with working solutions to help them overcome the shortcomings and develop efficient solutions for the issues that they experience in their daily activities.

Through internal auditing, the processes undertaken by the organization are known by the interested stakeholders. This is because the process looks into the different processes undertaken by the organization and decides whether they are efficient or not. Every process is looked into, and the final reports are made after the processes have been examined.

The implications of the processes on the current and future wellbeing of the organization are made. Therefore, when internal audits are conducted, it is likely for the stakeholders of the organizations in question to get a look into the processes undertaken by the organization and given a walkthrough on the processes associated with the different steps and the departments that are involved (Botha & Wilkinson, 2019).

Through the walkthrough, the stakeholders will understand the organization better and give better attention to the organizations than when they do not have an idea of the processes involved in the organization and the achievement of the processes' outcomes. Time management may also be achieved after the internal auditing processes since the organizations will examine the time taken executing the different activities and adjust them depending on whether the time positively or negatively affects the outcomes from the activities that the organization involves itself in. the management of time will ultimately lead to the improvement of the processes since the organizations will save time and maximize their attention and time on the activities which will assure them of more success from the different activities that they will involve themselves in.

Internal auditing also helps the organizations to test the different aspects which determine the outcomes of the organization. Organizations invest in different projects hoping that they will lead to the general improvement of organizational performance. When internal audits are conducted, the tested programs are reviewed regarding whether they contributed positively or negatively to the organizational performance.

When this happens, the organization will likely decide whether or not to continue with the projects or cut them out of their programs. For example, suppose the organization undertakes new practices and programs. In that case, they may use the reports from the internal audits to confirm the programs' efficiency and whether they should continue with them depending on the outcomes of the activities on the overall performance (Botha & Wilkinson, 2019).

Conclusion

Therefore, this shows that internal auditing processes help achieve assurance on whether the processes are positively contributing to the organizational performance, and if not, they will cancel the processes and look for alternatives. Finally, the auditing process acts as a way for the organization to report to their stakeholders on their performance. The process covers all the areas of interest to the organization, and this results in the organization getting a full picture of the outcomes of the activities it undertakes. Since the process involves the critical examination of the different processes undertaken by the organization, the organization will likely get a detailed report on their performance, resulting in active processes to help improve the outcomes of the organization.

References

Botha, L. M., & Wilkinson, N. (2019). A framework for the evaluation of the perceived value added by internal auditing. Meditari Accountancy Research.

Groff, M. Z., Di Pietra, R., & Sitar, A. S. (2016). Contemporary role of internal auditing in corporate governance. Dynamic relationships management journal, 5(1), 51-63.

Kidron, A., Ofek, Y., & Cohen, H. (2016). A new perspective on the black box of internal auditing and organizational change. Managerial Auditing Journal.

Raiborn, C., Butler, J. B., Martin, K., & Pizzini, M. (2017). The internal audit function: A prerequisite for Good Governance. Journal of Corporate Accounting & Finance, 28(2), 10-21.