Internal auditing is an independent, consulting, activity designed and performed by the professional to evaluate and improve the internal control system of the organization and improve the operations of the organization. In simple words, it is an independent examination to evaluate the internal controls of the organization, corporate practices of the organizations, processes, and methods, and such examination is done by the internal auditor.

On the basis of such examination, the auditor provides his independent and unbiased views to the management. Internal audits also provide the necessary tools necessary to the management to know about the operational efficiency and obtain the knowledge of identifying problems and correct all these problems before being discovered by the external auditor in a statutory audit.On the basis of internal audit, we can ensure compliance with applicable rules, laws, and regulations and it is very helpful to maintain accurate and timely accounts, financial statements.

The main objective of an internal audit is to check and evaluate the effectiveness and operational standards that are framed by an entity. On the basis of internal audits, the organization can check and maintain the internal control system. On the basis of an internal audit, we can identify any frauds which are done by employees, just like embezzlement of funds, etc.

Process of Internal Audit

During the internal audit, the internal auditor will gather the information and the understanding of the business activities of the entity, current internal control system, conduct the fieldwork testing, identify the problems, follow up with the respective department to resolve the issue, prepare an internal audit report, review such audit report with the management of the entity, and follow up with the management of the organization.

Now we will discuss all these steps in detail to conduct the internal audit.


In this step, the auditor will obtain the knowledge of the business, discusses the scope and objectives of the audit, will gather all the relevant information of the organization, will evaluate existing internal controls, and will plan the remaining steps for conducting the audit.

Prepare Audit Program

After the planning, the auditor will prepare the audit program to conduct the internal audit. He will prepare an audit program that how he will perform all the steps to complete the audit so that he can achieve the objectives.


In this phase, the auditor will determine whether the internal controls which are identified during the preliminary review are in operation properly or not. In this step, if auditor will find some issues and problems and then he will conclude it and will prepare the audit report.


In this step, the auditor will test all the major internal controls and he will also check the accuracy of the transactions.

Informal Communications

In this step, the auditor will discuss the findings with the management or those charge with governance to resolve all these findings. Normally the methods of communications are oral but when there are complex situations then the communication will be written.

Audit Summary

After the completion of the fieldwork, the auditor will summarize all the audit findings, will conclude the audit, and will draft the audit report after the discussion.

Working Papers and their Documentation

During the audit, the auditor will collect all the required working papers. These working papers are very useful and provide support to the auditor to frame the opinion.

Audit Report

In the audit report,he will express his opinions, explain all the audit findings, and will also provide recommendations to the management for improvements. After providing the recommendations he will ensure that all the recommendations are properly applied and then he will prepare the final audit report after the discussion with the management.