Internal Audit & Internal Controls
Internal audit process consists of determining the audit subjects, identifying the risk criteria, grading the risks, prioritizing the risk in the audit areas, determining the solution methods of the risks, allocating the data to be audited, planning, approval of the plan, execution of the audit, reporting and monitoring (follow-up) processes
Determining Internal Audit Subjects
It is necessary to determine the necessary fields for the companies with more than one location to determine which departments and which locations they will conduct an audit. Will internal audit be carried out from a broad projection or will it be carried out in units or areas that are considered risky? Scaling this should be the first step.
Identifying The Risk Criteria
In terms of risk, first of all, the risks for the company’s goals and objectives should be determined in a systematic way every year; Because not all internal and external risks are fixed. The possibility of the risks to occur and their possible effects should be analyzed, and information and documents should be collected from the employees of the departments that face risks in any matter, about the dangers they face, the reactions shown in these situations, and the solution proposals.
Grading & Prioritizing The Risk
According to the information gathered, the risks related to the activities carried out in the unit should be differentiated at certain levels according to their size, importance and priority of taking precautions. It is necessary to determine the probabilities of their occurrence and the effects when they occur.
Determining The Solution Methods Of The Risks
Determining the approach to possible risks should be conducted to reach a solution by one of the control methods such as accepting, transferring, occurring and reducing its effect, controlling or avoiding by stopping the activity.
Internal Audit
Planning – Management – Reporting
Provision of the Data to be Audited:
It is important to collect and upload the data to be audited in areas that pose a risk and require control. You must have all kinds of information and documents.
Internal Audit Planning:
After the data are collected, the authorities and managers come together to create an audit plan. After the approval of the administrators, commands are given from the program to the authorities.
Management of Internal Audit:
The audit is about the workflow. Spontaneous controls might be conducted.
Internal Audit Reporting:
The reporting of internal control activities by subjecting them to internal audit.
Internal Audit
Internal audit for large or medium-sized enterprises is an activity that is carried out by professionals who have experience and knowledge about systems, processes and workflows, and that serves to measure the adequacy and effectiveness of the internal control systems established to reduce the risks that may occur in terms of achieving the goals they have determined for the future of the enterprises.
It is defined as an independent and objective assurance and consultancy activity carried out with the aim of developing and adding value to businesses. Internal auditing is an objective, assurance and consulting activity. Today, internal audit covers compliance with the legislation, performance, financial, information technology and system audit applications. It is conducted based on the risks that businesses may encounter. Internal audit services lay the groundwork for presenting an objective opinion by using the data obtained about an institution’s systemic activities, workflow processes, compliance with legal regulations and other different elements.
Internal audit for large or medium-sized enterprises is an activity that is carried out by professionals who have experience and knowledge about systems, processes and workflows, and that serves to measure the adequacy and effectiveness of the internal control systems established to reduce the risks that may occur in terms of achieving the goals they have determined for the future of the enterprises.
It is defined as an independent and objective assurance and consultancy activity carried out with the aim of developing and adding value to businesses.
One of the components of internal auditing is to provide consultancy by providing added value by being an objective party in the matters faced by the business by giving assurance to the activities, provided that it is limited to the data examined.
Internal audit helps both the personnel working in the departments of the business and the activities of the business management to be carried out more efficiently. By contributing to the internal audit effectiveness evaluation, it helps businesses reach their goals together with risk, control and testing processes.
It is process oriented as a part of the management functions. Internal auditing is carried out to reduce the deficiencies of the enterprise rather than to find the faults.
Internal Controls
Internal control ensures that the activities of the enterprise comply with the regulations. It allows the business to take decisions in accordance with legal regulations. At the same time, internal control increases the effectiveness of the activities and helps the work to be carried out efficiently. It facilitates a more controlled progression to the future periods by achieving the most efficient results without any disruption in the workflows of all departments of the enterprise.
The internal control system is the foremost in planning, directing and arranging the taking of the necessary measures by providing assurance while the management units of the enterprises progress in line with their goals and objectives. Establishing an internal control system brings with it the improvement of the internal functioning of the enterprise and a stronger presence in the field of rival markets.
Necessary measures should be taken to have professional values and an honest management approach, to delegate authorities and responsibilities to experienced and competent people, to comply with standards, to prevent illegal transactions, and to ensure transparency with a comprehensive management approach. Businesses with an effective and adequate internal control system become more distinguished over time by making progress in their own sectors.
Control arrangements made together with the establishment, operation, monitoring, development and reporting of internal control are an inevitable necessity for every business operating today.
Internal control processes that require continuity and follow-up are carried out systematically within the framework of management responsibility. It is necessary to consider the internal control mechanism in the process definitions in the units, to focus on the internal control points in the processes and to monitor them continuously. For this reason, internal control is a process based on continuity that covers all activities, not just at certain points, in certain areas and at certain times. Internal control covers all units of the business and the functions of these units.
The Relation Between Internal Audit & Internal Control
Although the concepts of internal audit and internal control are different from each other, they have a reciprocal relationship between them. Internal audit is of great importance for businesses to achieve their goals and to carry out their activities effectively and efficiently. Internal control, on the other hand, is necessary in order to raise awareness in the functioning of the processes in the enterprises. Internal control is the establishment and implementation of the necessary control mechanisms in order to reduce the rates of risks that may be encountered in the enterprises.
Internal audit, on the other hand, is a distinct side of internal control. Business management learns information and documents about internal controls from internal audit reports. Internal audit team tests the accuracy and reliability of internal control activities. While internal control systems are a process that ensures the accuracy and reliability of business activities, internal audit reports by testing the accuracy and reliability of the activities. Internal auditing examines, evaluates and provides assurance.
Sıkça Sorulan Sorular
Internal auditors evaluate the internal control of companies from an objective and impartial perspective. By reporting to senior managers, they provide detailed information about the company with the findings obtained. Internal auditors are experienced industry experts.
Internal auditors evaluate financial risks and situations by addressing broad issues such as the reputation of the company, its impact on the environment, and the competencies of the personnel, with the aim of maintaining the growth stability of the companies and being the pioneers of the sectors they are in. It contributes to the success of companies by following and improving business processes with its consultancy service.
There are some differences between Internal Audit and Independent Audit in terms of reports, objectives, scope and responsibility for improvement. Independent Audit is within the scope of financial reporting and aims to provide reliability on financial reports by expressing an opinion on the report, while internal audit aims to evaluate and improve the internal control system by including all risk categories of the company in the reporting, and to produce solutions for the risks encountered.
The internal auditor assists management by assessing and communicating significant risks and highlighting processes where improvements are needed. The role of internal audit is to develop and protect organizational value by providing risk-based and objective assurance, advice and insight. Thus, internal auditors, along with management, are a critical part of advancing the company’s goals.
It is necessary to inform the Independent Auditor about the control of the process by performing the necessary risk assessments for the company, to monitor the changes in the control environment, to review the risk and control results, and to provide assurance on corporate targets together with the management.
The types of internal audit can be defined under 5 subjects:
- Compliance Audit
- Performance Audit
- Financial Audit
- Information Technologies Audit
System Audit
Internal auditors prepare an internal audit report together with the evaluations made within the scope of consultancy activities as a result of all kinds of compliance, performance, financial, information technology and system audit activities. Internal Audit Process consists of determining the audit areas, defining the risk criteria, grading the risks, prioritizing the risk in the audit areas, determining the solution methods of the risks, allocating the data to be audited, planning, approval of the plan, execution of the audit, reporting and monitoring (follow-up) processes.
- Evaluating the company’s management and internal control systems
- To examine the effective and efficient use of resources
- Checking the accuracy of information and documents
- Performing a legal compliance audit
- System audit of financial management and control processes
- Expenditures and decisions taken; overseeing compliance with the company’s goals and policies, plans and programs
- Reporting irregularities to the management
- Following the business process by finding solutions for improvement as a result of Internal Audit
Although the concepts of internal audit and internal control are different from each other, they have a reciprocal relationship between them. Internal audit is of great importance for businesses to achieve their goals and to carry out their activities effectively and efficiently. Internal control, on the other hand, is necessary in order to raise awareness in the functioning of the processes in the enterprises. Internal control is the establishment and implementation of the necessary control mechanisms in order to reduce the rates of risks that may be encountered in the enterprises.
Internal audit, on the other hand, is a distinct side of internal control. Business management learns information and documents about internal controls from internal audit reports. Internal audit team tests the accuracy and reliability of internal control activities. While internal control systems are a process that ensures the accuracy and reliability of business activities, internal audit reports by testing the accuracy and reliability of the activities. Internal auditing examines, evaluates and provides assurance.
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