CA S. Selvakumar, B.Com, ACA
Now, the world is in twenty first century, everywhere changes could be
visualised but with respect to accounting, auditing etc, where is the
change? Modern organisations have become more sophisticated and thus
resulted in decentralisation of their activities and consequently the
top management is remotely concerned with the day to day activities of
the Organisation. With this backdrop the internal auditing has
acquired a great deal of significance. The following are my opinion
about modern Internal Audits. Let us see what it is……..
1. The real “Watch Dog”
The internal auditor must be an independent dictator to the
internal-auditee with respect to his professional responsibilities. He
must be a WATCH DOG which will always have third eye to protect the
internal auditee from all kinds of financial frauds and threats.
Internal Auditors can always gather information for his
Internal-Auditee and could continuously forward the same to the
management for the benefit of the organisation. Having improved
technology of emails and internet, it is quite possible to send
meaning full messages to the auditee. An Internal Auditor must give
fraud free environment as believed in general to the extent
professionally possible.
2. Catch by Surprise:
Traditional internal audits deals only with ticking on the vouchers,
verifying the reconciliation statements and reviewing the invoices
etc, periodically. But to be effective an internal audit it must catch
things by surprise. The internal auditor has to visit the internal
auditee’s premise by surprise, without intimation for visiting them.
It is human tendency that once they think that our internal auditor
can come and verify at any time, the idea of committing mistakes and
frauds will be very much minimal. It is pertinent to note that the
modern man is always wise, so it is important for the business people
to place controls points and periodical checks to avoid malpractices
and relevant issues vested with.
3. Peace of Mind for Management
The satisfaction level of the organisation ought to be high that their
internal auditors are there to deal, whatever maybe the issue vested
with the business. The peace of mind is the most wonderful aspect
which the modern world forgets often.
4. Cyber Threat & Internal Controls.
In this twenty first century, the business world is only on clicking
the website for the business. These days, shows that every business
requires some sort of computer and its resources along with internet
facilities. Unlike accounting in the notes books, we are accounting by
way of software in various names like SAP, ERP, Tally and in house
packages. Of course without this it is very difficult to survive
specifically in India wherein numerous legislations and regulations
for business entities and serious consequences for non compliance of
the same laid out. Even from weigh bridge to currency counting, we
have software along with hardware. Sometimes we have to think where we
are in that, since the element of human intervention is very less.
This is prone to frauds and misappropriations etc. Recently when
somebody asks the banker about clarification of interest credit in his
account, he got the reply that “sir everything is done by the software
so we don’t know about how it works, you have to approach our head
office”
The duty of the Internal Auditors are not only doing audit internally
but also to cover the external fraudulent approaches against the
company to the extent possible. Disaster and crisis can provide
unbelievable opportunity for perpetrating frauds and a fraud can be
very easily camouflaged and it is very easy to fall into trap of
believing what one sees. Thus, in situations of disaster and crisis,
the internal auditor must not fall into the trap of believing and
depending only on what is apparent, unless he has estimated every
other possibility. In the required situations the internal auditors
has to use the ‘mistrust the obvious’.
5. Scope Unlimited
It is always questioned by the Internal Auditors for taking the
assignment that what is our scope? It is fine, if the organisation
wants only a portion of its works to be audited internally. But in
general the internal auditors should be given unlimited scope to deal
with the organisation to find out various ideas and improvements for
the business. It is obvious that once we restrict our mind with
respect to a thing, then physiologically we cannot look into other
aspects, which perhaps very import or favourable to the organisation.
Once the restriction given, then ‘thinking outside the box’ by the
internal auditor will surly run away from his mind except the audit
fees.
6. Revenue Leakage & Cost Control
It is another important duty which a prudent enterprise will always
expect from an Internal Auditor that, how to reduce cost of its
products? Is there any revenue leakages? It is only possible that, if
the internal auditor does his jobs with passion the enterprise will
get good output or else it has to read the dump delivered by them.
Identifying the revenue leakages and controlling the cost is an art,
which has to be seen with clear mind and without any scope
restrictions. The organisations must select the right internal
auditors who can do this persistently.
7. Alternative Ideas & Suggestion
Often it is understood by the Internal Auditors that, their works
comes to an end when they verify the financial accounting and its
relevant records. It is not so because it is only a 10% of the job
expected. But an internal auditor must look into various aspects
namely, Income-tax planning, service tax opinions, other indirect tax
matters, systems monitoring, developing standard operating procedures
etc. It could be noticed that many time the organisation will fails to
utilize its funds in a proper ways to get optimum benefits. This also
could be expected to highlighted by the Internal Auditors
8. The Financial Guard
The approach of the Internal Auditors must be like guarding the
business and giving peace of mind to the management so that they can
think over development of its business or new business etc. Every
technological usage and improvements in the financial sector has equal
quantum of risks and frauds which must be targeted by the Internal
Auditors
9. The End
It is disgusted that 95% of the internal audits ends only with a
report but whether the reports are read by the management or discussed
is remains unknown. When this reach is failed the entire system
consequently fails. An effective internal audit must be crystal clear
about bring the points to the management/concerned authorise and
implement the right decision and method in right time. Those who
indented to enjoy the benefit of having Internal Auditors must read
his report in depth and fight with him for the best things out of him
for the benefit of the organisation. At every internal audit end,
there must be a meeting and it must be with concerned departments and
all the findings of the Internal Auditor must be discussed in detail
and decisions to be taken on the spot. This is the right approach,
than sending report to the management and they will wait for sometime
by then next set of internal audit would have got over.
Dear Internal Auditors of the world! Please ensure that we adhere as
said above, if you have any contrary view please write to me.
The author is Chennai based Chartered Accountant he can be reached at
caselvaa@gmail.com/gsvselvakumar@gmail.com
Now, the world is in twenty first century, everywhere changes could be
visualised but with respect to accounting, auditing etc, where is the
change? Modern organisations have become more sophisticated and thus
resulted in decentralisation of their activities and consequently the
top management is remotely concerned with the day to day activities of
the Organisation. With this backdrop the internal auditing has
acquired a great deal of significance. The following are my opinion
about modern Internal Audits. Let us see what it is……..
1. The real “Watch Dog”
The internal auditor must be an independent dictator to the
internal-auditee with respect to his professional responsibilities. He
must be a WATCH DOG which will always have third eye to protect the
internal auditee from all kinds of financial frauds and threats.
Internal Auditors can always gather information for his
Internal-Auditee and could continuously forward the same to the
management for the benefit of the organisation. Having improved
technology of emails and internet, it is quite possible to send
meaning full messages to the auditee. An Internal Auditor must give
fraud free environment as believed in general to the extent
professionally possible.
2. Catch by Surprise:
Traditional internal audits deals only with ticking on the vouchers,
verifying the reconciliation statements and reviewing the invoices
etc, periodically. But to be effective an internal audit it must catch
things by surprise. The internal auditor has to visit the internal
auditee’s premise by surprise, without intimation for visiting them.
It is human tendency that once they think that our internal auditor
can come and verify at any time, the idea of committing mistakes and
frauds will be very much minimal. It is pertinent to note that the
modern man is always wise, so it is important for the business people
to place controls points and periodical checks to avoid malpractices
and relevant issues vested with.
3. Peace of Mind for Management
The satisfaction level of the organisation ought to be high that their
internal auditors are there to deal, whatever maybe the issue vested
with the business. The peace of mind is the most wonderful aspect
which the modern world forgets often.
4. Cyber Threat & Internal Controls.
In this twenty first century, the business world is only on clicking
the website for the business. These days, shows that every business
requires some sort of computer and its resources along with internet
facilities. Unlike accounting in the notes books, we are accounting by
way of software in various names like SAP, ERP, Tally and in house
packages. Of course without this it is very difficult to survive
specifically in India wherein numerous legislations and regulations
for business entities and serious consequences for non compliance of
the same laid out. Even from weigh bridge to currency counting, we
have software along with hardware. Sometimes we have to think where we
are in that, since the element of human intervention is very less.
This is prone to frauds and misappropriations etc. Recently when
somebody asks the banker about clarification of interest credit in his
account, he got the reply that “sir everything is done by the software
so we don’t know about how it works, you have to approach our head
office”
The duty of the Internal Auditors are not only doing audit internally
but also to cover the external fraudulent approaches against the
company to the extent possible. Disaster and crisis can provide
unbelievable opportunity for perpetrating frauds and a fraud can be
very easily camouflaged and it is very easy to fall into trap of
believing what one sees. Thus, in situations of disaster and crisis,
the internal auditor must not fall into the trap of believing and
depending only on what is apparent, unless he has estimated every
other possibility. In the required situations the internal auditors
has to use the ‘mistrust the obvious’.
5. Scope Unlimited
It is always questioned by the Internal Auditors for taking the
assignment that what is our scope? It is fine, if the organisation
wants only a portion of its works to be audited internally. But in
general the internal auditors should be given unlimited scope to deal
with the organisation to find out various ideas and improvements for
the business. It is obvious that once we restrict our mind with
respect to a thing, then physiologically we cannot look into other
aspects, which perhaps very import or favourable to the organisation.
Once the restriction given, then ‘thinking outside the box’ by the
internal auditor will surly run away from his mind except the audit
fees.
6. Revenue Leakage & Cost Control
It is another important duty which a prudent enterprise will always
expect from an Internal Auditor that, how to reduce cost of its
products? Is there any revenue leakages? It is only possible that, if
the internal auditor does his jobs with passion the enterprise will
get good output or else it has to read the dump delivered by them.
Identifying the revenue leakages and controlling the cost is an art,
which has to be seen with clear mind and without any scope
restrictions. The organisations must select the right internal
auditors who can do this persistently.
7. Alternative Ideas & Suggestion
Often it is understood by the Internal Auditors that, their works
comes to an end when they verify the financial accounting and its
relevant records. It is not so because it is only a 10% of the job
expected. But an internal auditor must look into various aspects
namely, Income-tax planning, service tax opinions, other indirect tax
matters, systems monitoring, developing standard operating procedures
etc. It could be noticed that many time the organisation will fails to
utilize its funds in a proper ways to get optimum benefits. This also
could be expected to highlighted by the Internal Auditors
8. The Financial Guard
The approach of the Internal Auditors must be like guarding the
business and giving peace of mind to the management so that they can
think over development of its business or new business etc. Every
technological usage and improvements in the financial sector has equal
quantum of risks and frauds which must be targeted by the Internal
Auditors
9. The End
It is disgusted that 95% of the internal audits ends only with a
report but whether the reports are read by the management or discussed
is remains unknown. When this reach is failed the entire system
consequently fails. An effective internal audit must be crystal clear
about bring the points to the management/concerned authorise and
implement the right decision and method in right time. Those who
indented to enjoy the benefit of having Internal Auditors must read
his report in depth and fight with him for the best things out of him
for the benefit of the organisation. At every internal audit end,
there must be a meeting and it must be with concerned departments and
all the findings of the Internal Auditor must be discussed in detail
and decisions to be taken on the spot. This is the right approach,
than sending report to the management and they will wait for sometime
by then next set of internal audit would have got over.
Dear Internal Auditors of the world! Please ensure that we adhere as
said above, if you have any contrary view please write to me.
The author is Chennai based Chartered Accountant he can be reached at
caselvaa@gmail.com/gsvselvakumar@gmail.com
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