Internal audit - Traditional role
Traditionally, internal audit was initiated as an extended arm of statutory audit of financial statements to act as a catalyst by providing independent assurance that an organization’s risk management, governance and internal control processes are operating effectively.
Internal audit - Current scenario
In today’s increasing complex environment, a business are fronting multiple challenges like cyber threats, business analytics, technologies risk, corporate governess, business performance risk, competition, regulatory compliances etc.
With increased regulatory focus (Compliance for Income tax, GST, Employee PF, ESIC and other direct/indirect taxes, labour reforms, Companies Act 2013, BEPS, Money Laundering Act, and Corporate Governess etc.) and widespread negative impact, the managements are increasingly concerned about the susceptibility of their businesses to noncompliance and fraud. This brings into focus the role of internal audit in getting assurance about compliance with regulatory framework and fraud risk management.
Regulatory compliance- Challenges ahead and changing role of internal auditors
Emergent regulatory compliances facilitate enormous pressure on organizations. This has elicited a seemingly increasing amount of new regulation for organizations to manage all regulatory compliance.
Meeting these new regulations is adding substantial cost to a company and complexity to internal structures and information needs. As organizations work towards minimizing the losses, their anti-compliance policies and procedures are increasingly looking towards the internal audit function for support. The expectation from internal auditors is to provide objective assurance to the board and management that controls are sufficient for identified noncompliance and fraud risks to ensure that the controls are functioning effectively.
Key drivers for Internal Audit for mitigating regulatory compliance risk
Regulatory authorities and government expect due diligence, compliance with respective direct and indirect laws. Companies are inundated with new regulatory requirements which are putting increased burdens on management and staffs, raising the possibility that certain compliance requirements are being missed. Therefore, companies need to combine their compliance function and ensure a holistic approach to corporate compliance. The key drivers of internal audit include:
- Ensure compliance with increasing number of direct and indirect taxes and regulations
- Moderating the increasing costs of complying with this ever-growing number of such taxes and regulations
- Developing a strategy to lessen the confining impacts of such compliance activities on businesses
Role of internal audit- Coping up with regulatory compliances
Although the role of internal audit function vary in scope and authority in different organizations, there is a clear trend that internal audit is taking on a more strategic and central role.
The role of internal audit in coping up with regulatory compliance is given as under:
Get in touch
- Make a list of regulatory bodies and their requirements affecting the company
- Provide assurance in regards to the design and operating effectiveness of the organization’s compliance framework.
- Assess the company’s approach to managing its compliance activities
- Ensure compliance training programs offered to employees and other stakeholders are appropriate for role
- Evaluate the organization’s response to any instances of noncompliance
with us to know more.