Compliance is no longer an ideal and has become a reality in many United Arab Emirates companies. More and more managers understand the need to take measures to find and combat unethical behavior and corruption in organizations. However, it is still common for there to be confusion between these processes and internal audit.
Even some industry professionals ( compliance officers and auditors) often confuse the areas, believing that just one of them is enough. Hence the importance of delimiting the performance of these functions. Both are essential for the smooth running of the company and, therefore, must be carried out separately.
In this post we explain what an internal audit is and what are its 7 main advantages. Read on and find out why you should do it in your business!
After All, What Is An Internal Auditor In Uae?
It is an independent activity, the objective of which is to add value to the company, through an evaluation and consultancy work. Internal audit is an objective, systematic process, used to assess corporate governance, the use of internal controls and risk management.
Its purpose is to assess the organization in a systemic way. The audit verifies whether the controls adopted are sufficient to resolve operational problems and threats, among other issues that can damage institutional efficiency and image.
WHAT IS THE DIFFERENCE BETWEEN AUDITING AND COMPLIANCE?
First of all, we must understand that compliance means being in compliance with something, be it a law, a rule or an internal regulation. Thus, it consists of an attitude, a way of acting or a set of actions that involves all those belonging to the organization.
Thus, we cannot say that internal audit and compliance are the same, but that they are complementary. After all, both seek the best functioning of the company.
However, compliance is involved with the definition and establishment of rules, risk management and the awareness of employees and managers. While the audit seeks to analyze the controls and processes used, seeking to identify points for improvement or that generate growth opportunities, detecting irregularities in the organization.
In other words, compliance is concerned with implementing fraud detection and prevention tools. The internal audit, on the other hand, checks whether these standards are being well applied, according to samples and punctual and scheduled checks.
Another fundamental difference between compliance and internal auditing is the involvement of managers. If, on the one hand, they actively participate in the process of establishing rules and standards, on the other, they must be left out of the audit, in order to guarantee the exemption of the process, even if they are responsible for it.
Finally, it is also worth noting that the audit can be considered a response to the risks to which the company is exposed. Because internal controls must ensure that the organization is in compliance with the law. That is why, although they are not the same thing, they are codependent activities.
WHAT ARE THE ADVANTAGES OF CARRYING OUT THE INTERNAL AUDIT?
Given these concepts, we can now talk a little about the benefits of internal auditing. Obviously, they can vary according to the size, the area of operation and the peculiarities of your organization. But in general, we can highlight the following 7 advantages.
1. Ensures the use of controls
The first advantage is related, precisely, to the application of internal controls. There is no point in investing in their implementation if they are not used well, as this way, it will not be possible to achieve the expected results. Thus, internal audit is a process of verifying the instruments used to control the company's processes, whatever they may be, and their effectiveness.
2. Check the application of policies
Likewise, internal policies must also be followed to the letter, not only serving as an ideal. The audit has the mission to reveal how much they are being respected and put into practice, as well as their effects on the organization's routine.
3. Evaluates the effectiveness of the standards
In addition to policies, standards must also be verified. While compliance is in charge of determining which ones are pertinent and creates means for inspection, the internal audit must certify if they are being met. In other words, together, these two instruments are fundamental for ensuring compliance, avoiding fraud and other problems arising from unethics or corruption. within the organization.
4. Anticipates and seeks to solve problems
In assessing policies, controls and standards, the audit is able to identify real or potential problems that may put the company at risk. So it is a way to prevent these problems from arising and, at the same time, to minimize their effects. It is good to remember that such occurrences can be quite harmful if they are not resolved in time, since they have already been subjected to a whole previous process of analysis of compliance risks .
5. Identifies possibilities for improvement
The audit does not serve to identify only problems. On the contrary, it is easier to find points that can be improved or contribute to the growth of the company. That is why it is usually carried out before major changes, such as a merger or acquisition process.
6. Increases the reliability of the company
Like compliance, internal audit is a way to increase the trust of customers, suppliers, employees and others involved in the business. It is a way to seek transparency and maximum efficiency in processes, showing different audiences how important this is for the organization.
7. Contributes to decision making
Finally, it is important to highlight how much internal audit contributes to decision making, not only by pointing out opportunities. The fact is that having an external view - since managers do not participate in it - is a way of going further, of perceiving and foreseeing different scenarios and possibilities, something so important for decision-making.
Finally, the internal audit is the ideal tool to identify the effectiveness of all forms of control and the use of the proposed rules and policies. Therefore, it is worthwhile to know a little more and carry out this type of activity in your business.
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