Internal Audit Case Study

Internal Audit and Fraud

The main aim of any firm is to maximise profits, either through trading of goods or provision of services. In order to have a better control of what is going on in the business, firms record their transactions to be able to make decisions at last. They need to audit their financial statements to assess their reliability. If the companies are listed, it is mandatory for them to have their financial statements audited while for those which are not listed, it is recommended to do so. Given the fact that companies have to be audited, they would not want to make any mistake and are more likely to be in accordance with the law. This is where the internal audit emerges in order to ensure that the company is operating in

Internal audit is the independent appraisal activity within an organisation for the review of accounting, financial and other business practices as protective and constructive arms of management. It is a type of control which functions by measuring and evaluating the effectiveness of other type of controls. According to Professor Walter B. Meigs, internal auditing consists of a continuous critical review of financial and operating activities by a staff of auditors functioning as full time salaried employees. In big organisations, an internal audit is carried out by the team of professionals in the organisation. The internal audit is not mandatory but the organisation gets the internal audit done with a view to evaluate the effectiveness of internal control, the soundness of financial system and effectiveness of business processes. This provides management an assurance about the control process in the organisation and it aids in early detection of inefficiencies and fraud. It also helps the statutory auditors in getting the audit done

Similarly, internal audit determines the reliability, reality, and integrity of financial and operational information that comes from different organizational units, on which appropriate business decisions at all levels of management are based. Successful implementation of internal audit tasks means that it must be independent, i.e., company management should in no way influenced by its work, information, conclusions, and evaluations. In this way the internal audit report becomes a means of communication between internal audit and management, and an important guideline for the successful management of the company (Ljubisavljević & Jovanovi,