Internal Audit: Definitions, Objectives and Duties of Internal Auditor

Internal audit is the independent appraisal activity within an organization for the review of accounting, financial and other business practices as a protective and constructive arm of management. The internal audit in the modern concept may extend to review of all operations of the enterprise as well as evaluation of the effectiveness of the management by its employees specially appointed for this purpose.

Definitions of Internal Audit

According to the Institute of Internal Auditors of U.S.A., “Internal auditing is an independent appraisal activity within the organization as a service to the organization. It is a control which functions by examining and evaluating the adequacy and effectiveness of the controls.”


“Internal audit is the audit of a company affairs and activities from within.”


According to the Council of the Institute of Chartered Accountants of England and Wales, Internal audit is a part of the whole system of internal control but is not an integral part of the internal check. Two essential features of internal audit are that it should operate independently of the internal check and that in no circumstances should it divert anyone of the responsibilities placed upon him.


According to the Institute of Cost Accountants of U.K., “Internal auditing is an independent appraisal activity within an organization for review of accounting, financial and other operations as a basis of service to management.”

However internal auditor is to review and report and is not expected to shoulder himself the function of the operational managers. Internal audit also assures the management that the system of internal check is effective in design and operation.

Objectives of Internal Audit

The main objectives of internal audit can be stated as under:

  1. Check correctness of transaction

To check the correctness and truthfulness of the transactions of accounts with reference to vouchers and documents.

  1. Existence and protection of assets

To verify the existence of the assets and of the adequacy of the system of custodianship and safeguarding of the assets.

  1. Procedure adopted

To chart out procedures and policies for proper accounting of transactions and follow standard accounting practices.

  1. Record maintenance

To ensure that proper and adequate statistical records are maintained and furnish information needed to the management

  1. Weakness analysis

To analyses and plug the weaknesses in the internal control system and plan effective functioning

  1. Proper authorization

To examine that all transactions are carried out with proper authority and according to the policies, procedures and regulations lay down by the management.

  1. Review of efficiency

To review/investigate the efficiency and effectiveness of the various functional areas according to the needs of the management and report on the same.

  1. Suggestions

To suggest improvement in the financial and non financial controls. Remedies for loopholes pointed by the auditors.

  1. Errors and fraud

It establishes an automatic mechanism to detect errors and frauds at an early stage and can be rectified at the earliest possible time.

  1. Audit work reduces

In the presence of good internal control system, the auditor examines the few items and remaining are left treated as checked which cause reduction of auditor work load


The duties of an internal auditor are indicated below:

  1. Find the weaknesses of internal control

To review the internal control system and procedures and plug weaknesses in the control system and suggest effective functioning.

  1. Safeguarding the affects

To examine the custodianship and safeguarding of the assets.

  1. Follow the policies

To verify the compliance with policies, plans, procedures, laws and regulations to achieve the company’s objectives.

  1. Reliable information

To ascertain the relevance and reliability of information supplied to the management and available with the company

  1. Suitability to achieve the objects

To examine the organizational structure and its suitability to achieve the objects and goals of the enterprise.

  1. Utilization of resources

To review the utilization of resources with economy and efficiency.

  1. Review the performance

To review the, achievements and performance of the enterprise with reference to its objectives.

  1. Proper record

To ensure the fact that proper and adequate statistical records are for the need of the management.

  1. Duties assigned

Performance of any other duties that may be assigned by the management to the internal auditor.

  1. Assistance to statutory auditor

To give assistance to the statutory auditor in performance of his audit work.

  1. Suggestions for improvement

To suggest improvements to the management in various functional areas in the context of managerial requirements. The internal auditor must be capable of carrying the work impartially and discharge the responsibilities satisfactorily and provide support to the management. Therefore, the internal audit system should be developed to suit the organizational elements.

Leave a Reply

Your email address will not be published. Required fields are marked *