Internal audit is often regarded as ‘management control’ in its simplest understanding. It is an independent and systematic reviewing and consulting process that ensures that an organisation’s management can achieve its objectives, goals and missions. While performing this duty, an internal audit assists in improving the effectiveness of risk management, control and governance regulations.
The definition reveals the benefits of management control yet there is more to add to an organisation’s knowledge as misconceptions related to the process are still prevalent.
No matter the size of a business, internal audit functions help organisations abide by good business practices that are crucial for an organisation in terms of compliance and efficiency. It also acts as the second line of defence (after the first line such as segregation of duties, whistle blowing, peer reviews, rotation of staff) against frauds and violations of laws and regulations.
Although an external audit examines the financial statements and in doing so reviews certain internal controls, its focus is vastly different from the way internal auditors in the UAE assess and evaluate internal controls.
Even if an organisation hires experienced employees, it is probable that the employees may have, over the years, assumed additional responsibilities without proper and adequate training. In such cases, internal management control may address the apparent possibilities of neglect in operating efficiencies, lack of competence and undetected errors that may lead to a weakened or compromised business environment.
Several such operational lapses merit that a robust and effective internal audit review is part of an organisation’s efforts to mitigate operational, financial, control and other risks which, if not identified and addressed in time, can have grave consequences.
Audit Plan Parameter
At least 8 proven approaches have been identified to make internal audit in the UAE more effective for an organisation. These try and ensure that the internal audit process responds efficiently and in time to risks that are likely to have the highest impact on the business of an organisation.
With the increasing use of digital tools and related cyber risks, cybersecurity is to be prioritised in the management control agenda. A comprehensive cybersecurity audit covers all digital assets, data processes and systems.
2. Cultural Program
An organisation’s culture reflects the core values of a business which directly impact public trust. An internal audit performed on these grounds assesses the quality of cultural drivers. Moreover, it enables the organisation to align the culture with compliance activities, financial objectives and operating models.
3. Integrated Assurance
Integrated assurance applies internal audit techniques considering various risks faced by an organisation and leveraging compliance, governance and audit functions across its various business operations. It also helps in assessing business implications of rising trends and associated opportunities and risks.
4. Regulatory Compliance
Local, national and international regulations keep varying and so does the cost of compliance. In this regard, internal audit evaluates responses to various requirements and highlights costs and risk of non-compliance. It also evaluates the most cost-efficient way of managing compliance considering an organisation’s business environment, strategies and inherent risks faced. It also provides assurance related to the design and operational effectiveness of an organisation’s compliance framework.
5. Third-party Relationships
Third parties play a significant part in global organisations. An internal audit function to oversee and even track third-party relationships provides a degree of safety against multiple risks including data security, reputation, legal and compliance risks among others.
6. Corruption and Bribery
The management control process, in tandem with the legal team, evaluates an organisation’s prevailing anti-corruption and anti-bribery guidelines and procedures in accordance with leading practice and regulatory guidance. This is followed by implementing the principal elements of anti-corruption and anti-bribery programmes to provide assurance against corruption or bribery risks and potential non-compliance.
7. Emerging Technologies
A host of new technologies is disrupting the way businesses operate. Organisations continue adopting advanced technologies and hence internal audit needs to proactively assess and obtain insights into risks associated with them. An effective internal audit team helps detect and prevent emerging risks.
8. Data Analytics and Performance Management
Leveraging data analytics capabilities across each area of the business results in direct cost savings through more effective and targeted audits. The internal audit team ensures that the business maintains financial and operational performance while allocating its resources to the most vital objectives and efforts of an organisation.
The team of internal auditors at PKF executes proactive risk-based auditing in the UAE to strengthen the overall control systems and thus mitigates the risk of control malfunctions or financial losses.
The core focus is on Business Risk and Control Reviews, Compliance audit, Continuing Assurance and preparation of Operating and Accounting Procedures Manuals.
Reach out to us for a comprehensive internal audit service to unfold strengths and flaws in your business, and receive professional advice for improvement of business functions.
The primary goal of the auditors in the UAE is to abide by the best practices and lead the auditing process to improve the planning, performance and management of the business in the direction towards achieving the objectives.