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INTERNAL AUDIT METHODS AND THEIR IMPORTANCE
Elov Olimdjon Komilovich
navoi state university, " geography and basics
of economic knowledge." lecturer
Mamajonov Mansurbek
Navoi state university, 3rd-year student at "school management.
E-mail: mr.olimdjon@gmail.com
https://doi.org/10.5281/zenodo.14235431
Abstract.
Internal audit is a department or organization within a company
tasked with the impartial and independent analysis of systems, business
organizations, and processes. The role of the internal audit department is to
provide senior management and governing bodies with an objective source of
information regarding: The organization's risks, The control environment,
Operational efficiency, Compliance with applicable laws and regulations.
Key words:
Similarities Between Internal and External Audit, Planning
Phase, External Audit.
Introduction.
Internal audit involves analysis and inspection methods
aimed at evaluating control mechanisms within an organization and improving
process efficiency. This process helps the organization achieve its goals, ensures
the rational use of resources, and reduces risks. Below is a comprehensive
overview of internal audit methods and their significance.
Since internal audit reports to senior management, it is appropriate for its
activities to be overseen exclusively by the CEO or the Board of Directors
through the Audit Committee. Internal audit members must remain independent
of internal policies and be impartial to provide management with an objective
source of information. Under the leadership of the Audit Committee, internal
audit systematically collaborates with management to review control activities
over key systems and processes. The inspections conducted by internal audit are
often referred to as internal audits. Internal audit can be used to assess an
organization's performance or the execution of a process against a set of
standards, policies, benchmarks, or regulations. These audits may include
evaluations of corporate governance, accounting, financial reporting, and IT
general controls within the organization.
The main objectives of internal audit
Internal audit helps the organization
achieve the following objectives:
Identifying and mitigating risks
– Detecting
potential risks in the organization’s activities and developing strategies to
minimize them.
Ensuring compliance and detecting violations
– Ensuring
that the organization’s activities comply with applicable legislation and internal
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policies.
Ensuring financial reliability
– Guaranteeing the accuracy and
correctness of financial documents.
Improving efficiency
– Promoting the
rational use of resources and enhancing operational processes.
Methods of Internal Audit
Various methods are used in the internal audit
process, each aimed at obtaining, analyzing, and evaluating specific information.
1.
Document Analysis
. By reviewing the organization’s financial reports,
contracts, purchase-sale transactions, and other documents, the accuracy and
reliability of the data are determined.
Advantages
: Allows the study of the
organization’s real activities through documents. Provides the opportunity to
obtain precise information about the organization’s financial condition.
2.
Conducting Surveys and Interviews
. Through interviews and surveys
with employees, a detailed understanding of processes is gained, as well as
information about the employees' tasks and how they are performed.
Advantages
: Direct communication with employees helps identify problems.
Provides an opportunity to study the internal environment of the organization.
3.
Observation and Monitoring
. By observing operational processes within
the organization, employees' activities are assessed in real-time. This helps
ensure the efficiency of the process and its compliance with standards.
Advantages
: Identifies operational efficiency by directly observing the
processes. Allows real-time evaluation of whether changes are needed.
4.
Data Analysis
.Through the analysis of financial, operational, and other
statistical data, a deeper understanding of the organization’s performance is
developed. This process is used to identify risks and improve efficiency.
Advantages
: Provides complete information on financial and operational
efficiency. Identifies risks and weaknesses.
5.
Comparative Analysis
. By comparing the organization’s internal and
external indicators, the effectiveness of operations is evaluated, and areas for
improvement are identified. Comparative analysis allows the organization’s
position to be determined in relation to competitors and industry benchmarks.
Advantages
: Helps assess the organization’s standing in the industry. Aids in
enhancing competitiveness.
6.
Risk Analysis and Management
.Identifies risks within the organization
and assesses their impact on financial and operational activities. This analysis
helps develop and implement strategies to mitigate risks.
Advantages
: Helps
ensure the organization’s safety. Improves financial stability.
The Importance of Internal Audit.
Internal audit provides a number of
benefits for the effective and sustainable development of an organization:
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Ensuring Financial Reliability
:
Internal audit ensures the accuracy and
reliability of reports and financial data, which is crucial for management.
Risk
Management
:
Timely identification and mitigation of risks allows for
addressing problems at an early stage, helping protect the organization from
financial losses and risks that could damage its reputation.
Improving Process Efficiency:
One of the main tasks of internal audit is to
analyze the processes within the organization and identify opportunities to
improve efficiency. This contributes to optimal resource utilization and
enhances operational effectiveness.
Increasing Confidence
: Based on the results of internal audits, management
and stakeholders (investors, shareholders) gain reliable information about the
organization's financial and operational activities.
Supporting Planning and Strategic Decision-Making:
Internal audit is an
important resource in helping the organization achieve its long-term strategic
objectives. Based on audit findings, planning processes are improved, and
making strategic decisions becomes easier.
Who conducts the internal audit?
Internal auditors, usually employees of
the company, carry out the internal audit. However, companies that lack the
necessary expertise or workforce may outsource this task to an external
organization. Internal audit – assessing and improving the effectiveness of
management, risk management, and control over key processes. Providing the
board and management with information and assurances related to their
responsibilities.
Where do internal auditors report?
Internal auditors prepare reports
summarizing the results of audits and their findings once the audits are
completed. Typically, there is no specific physical location where these reports
are stored. However, internal audit usually reports the results of its findings to
management members who have oversight responsibilities. Internal audit also
reports on its activities, including key findings, at meetings of the Audit
Committee.
Conclusion.
The goal of internal audit is to identify weaknesses in the
organization’s processes and internal control environment, enabling corrective
actions to be taken as quickly as possible to prevent harm to the organization or
its stakeholders. Accordingly, the internal audit plan should be developed based
on risk, meaning it should focus on areas that pose the greatest threat to the
company. The internal audit plan should also align with the organization’s
strategic needs. Similarly, each internal audit objective should correspond to the
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audit plan. Internal audit plays a crucial role in ensuring the effectiveness and
sustainability of the organization. By thoroughly analyzing all aspects of the
organization's operations, internal audit helps identify shortcomings and take
corrective actions. Therefore, internal audit is a key tool that significantly
contributes to the company’s growth and development
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