Internal Audit
Definition
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations, risk management, and internal controls.
Explanation
Internal audit functions evaluate the effectiveness of internal controls, risk management processes, and governance structures. They provide independent assurance to management and the board of directors that organizational processes are operating effectively.
Internal auditors follow professional standards set by the Institute of Internal Auditors (IIA). Their work covers financial, operational, compliance, and IT audits, helping organizations identify risks, improve efficiency, and prevent fraud.
Example
An internal audit team reviews the company's procurement process, identifies a lack of segregation of duties in the purchasing department, and recommends implementing a dual-approval system.