An organization is formed by compelling several factors and crucial resources. Whereas every moving forward step brings change and a new challenge. To shield your business with these new changes, you require exceptional risk management and controlled framework. When we talk about financial sectors such as a bank, deregulation and activities of frauds are the biggest reason that demands efficient risk management and internal control. To give you some examples, Enron and Worldcom in the USA is the perfect case of corporate fraud. 

There are a large number of businesses, who just vanished from the market because of frauds. To overcome these, stakeholders demand an effective and vigorous framework that not only provides an efficient management process but also performs an independent analysis and evaluation. To achieve all these goals, Internal Audit is the perfect fit for the banking sector. So, let us know more about the internal audit in detail. 

What is Internal Audit 

According to the International Professional Practices Framework (IPPF), it is an independent, goal assured and consulting activity, which is crafted to add more value and improve the operation of an organization. It supports the organization in achieving a systemic, disciplined approach that helps in accomplishing business objectives. It also enhances the efficiency of risk management, control and governance processes. 

General Role of Internal Audit 

Internal audit in banks plays an important role in making it work proficiently. Whether evaluating the internal controls system or reviewing risk management procedures, there are various functions which are performed by internal audit. Let’s look at some general role of an internal audit. 

Audit Plan 

The first step or initial stage of any internal audit begins with the Audit Plan. Whether it is a corporate, bank or any other sector, the audit plan plays a very vital role. Based on risk assessment, the audit plan includes every single detail, from timing, frequency of work to when internal audit in banks should be carried out. Through risk assessment procedure, internal audit scrutiny every single activity of the bank and internal control system to identify the risk associated with it.   

While crafting the audit plan, it includes all the future development and evaluation planned by internal auditors. It also covers all the resources and time required to perform any special investigation or any other specific activity. The audit plan should be signed and approved by bank management. 

Audit Procedures 

All the promises and plans penned down in the Audit plan should be accomplished through audit procedures. By identifying the risk associated with the bank’s operation, audit procedures should be assigned. Auditors will take audit samples and random samples from each core area of the banking transactions. Some vital areas to be taken into consideration are Loan, Cash Transactions, Documentation, Charges and taxes and 

Audit Report 

To make a discussion, Internal Auditors will file a written audit report with higher management. The audit report should include the following,

• The scope and purpose of the Audit 
• The Conclusion 
• The response received from the bank Auditors

The report should also include comments and recommendations from the auditors to the management on how to reduce the associated risks. The auditor should also check whether the organization is implementing the changes suggested in the last financial year. 

These are some general roles that an internal audit performs for the bank. There are various other roles and responsibilities that an internal audit went through to make the institution work effectively. 

Benefits of Internal Audit 

Through an excellent internal auditor, the bank can witness several benefits along with strong internal functioning. Let’s look at the benefits 

• Highly accurate internal audit helps the bank in detecting fraud and take necessary steps to control it. 
• Identifies needless policies and recommends enhanced policies to improve overall operations. 
• Non-performing assets are very crucial for any bank, Internal audit provides excellent control over it to make your organization more trustworthy. 
• Regular internal audit assures better performance and strong credibility between stakeholders. 
• It complies with statutory law and regulations.
• A random sampling of cash transactions by the internal audit ensures that cash is properly maintained. 
• Consistent internal audit offers peace of mind and better operation to the statutory auditors. 
• Through the internal audit, bank employees work more efficiently. 

Wrapping Up 

Whether you’re an organization or a bank, internal audit plays a vital role in maintaining your overall business accountability. From providing decisive decision-making power to evaluating fraud and needless activities, internal audit proves to be a robust defence mechanism for banks. 

By identifying inherent business risk, the internal audit in banks suggests with corrective measures to operate efficiently. So make sure your organization is complying with internet audits to witness exceptional growth and prevent the business from unnecessary fraudulent activity.

Make your institution and organization stand firm against the emerging risk and compliance with risk and regulatory requirements with our professional Internal Audit services. Contact us today to know more.