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Internal audit is an important part of the internal control system. Guidelines issued by the institute of chartered accountants of India on internal auditing define it as “an independent appraisal involving specialized application of the techniques of auditing in accordance with the specific need of the enterprise.”

The institute of internal auditor USA defines internal auditing as an independent appraisal function established of accountancy financial and other operations as a service to the organization and established by the management of organization.”

Objects of internal audit: The objects of internal audit are as follows:

1. To assist the internal control system – Internal audit is a part of the internal control system, its main object is to assist the working of the internal control system.

2. Review of the organization policies and their operations – Another main object of the internal audit is to review the organizational policies and ensure their smooth operations.

3. Verify the accuracy and authenticity of errors and frauds – internal audit help in detecting and preventing the errors and frauds.

4. Detection and prevention of errors and frauds – internal audit helps in detecting and preventing the errors and frauds.

5. Safeguarding the assets – Internal audit helps in safeguarding the asset of the business.

6. Applicability of accounting policies – Internal audit ensures that the decided accounting policies are followed in maintaining the books of account.

7. Right disposal of assets – Internal audit also checks the procedure of disposal of the fixed assets. It ensures that they should be sold to the highest payers.

8. Expenses properly authorized - Internal audit ensures that all the expense are properly authorized.

9. Helps in smooth functioning of internal check system – internal audit system also helps in the smooth running of internal check system

Internal audit system is a critical evaluation of the functioning of various departments of enterprise. Internal audit implies an audit of books of account by the employees of the organization itself.

Internal audit is done by separate department known as internal audit department. Its staff may or may not have required professional qualifications. An internal auditor has to see that there is no wastage and the business is carried on efficiently.

For example, when purchasing furniture, whether tenders were invited or not. When waste material was sold, whether that was sold by auction or by inviting tenders, and to the highest bidders.

Difference between internal check and internal audit.

Following are the main differences between internal check system and internal audit system:

1. Way of checking – In internal check system work is automatically checked whereas in internal audit system work is checked specially.

2. Cost involvement – in internal check system checking is done when the work is being done. Mistake can be checked at an early stage in internal check system.

3. Thrust of system – Thrust of internal check system is to prevent the errors and whereas the thrust of internal audit system is to detect the errors and frauds.

4. Time of checking – In internal check system checking is done when the work is being done whereas in internal audit system work is checked after it is done. Mistakes can be checked at an early stage in internal check system.

Thus combining these two systems, the purpose of prevention and detection of errors and frauds can be achieved.