Organizations have management structures which have to be regulated by various internal controls. Strategic planning is also essential for management in an organization. Internal audit has been defined by the Institute of Chartered Accountants of India as the process of handling risks in an organization. Some of the principles related to internal audit deal with the best practices that are followed by the management of an organization. Internal audit functioning is governed by the ICAI and these frameworks apply to all practitioners throughout India.
When it comes to international standards of internal audit, international accounting practices are followed. The principles and rules which need to be followed by companies in India are governed by the Institute of Chartered Accountants of India. There has to be compliance with the laws related to Companies Act 2013 mainly. According to section 138 of the CA 2013 the company board apart from having a chartered accountant can also have a cost accountant for the performance of internal audit functions of the board. Therefore Internal Audit can be understood as an independent assurance function to internal controls and management of the organization. This will also bring into picture governance framework in the organization.
For an organization to succeed the elements of internal audit, have to be considered. The following are the elements of internal audit:
This means that there has to be independence of the audit functions and other functioning of various departments
This means that has to be a system of internal controls in place to handle risks from all perspectives
This means having proper corporate governance compliance within the organization. Ensuring compliance with governance in India implies compliance with the Companies Act 2013 and other laws that affect companies. Governance also determines the relationship between the board of directors and the stakeholders of the company.
This means ensuring the organization is going in the directions of the goals.
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