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Why Internal Audit is Needed for Business?

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Internal auditing involves independent inspection of an organization’s governance, risk management, and operational processes to highlight areas of improvement. But is internal audit really needed?

This comprehensive guide will enable you to understand what exactly internal auditors do, key areas they provide oversight on, and top reasons why every business should invest in internal audit.

Responsibilities of an Internal Auditor

  • Evaluate Process Efficiency – Study workflows to remove bottlenecks causing delays or wastages
  • Ensure Policy Compliance – Check if regulations, controls for finance, operations, IT etc. are adhered
  • Identify Risk Exposures – Recognize gaps in procedures, systems that could lead to losses
  • Highlight Improvement Areas – Call out problems in efficiency, output quality needing improvement
  • Prepare Audit Reports – Document findings and practical recommendations for management action

While they don’t execute fixes themselves, internal auditors provide vital insights.

Core Areas Where IA Provides Oversight

Internal audit plays an expansive role in assessing 5 key domains:

1. Stringent Financial Controls

  • Confirm revenue leakage risks are plugged
  • Verify fraud prevention controls are adequate
  • Check purchase approval limits enforcement
  • Validate the safeguarding of organizational assets

2. Optimized Operations

  • Pinpoint workflow inefficiencies causing delays
  • Analyse decision making chains that create bottlenecks
  • Model process changes to save costs, time
  • Gauge output quality issues needing correction

3. Air-Tight Regulation Compliance

  • Examine if quality, environment standards are fully met
  • Validate adherence to labour laws
  • Check privacy protections work
  • Ensure conflict of interest guidelines hold

4. Secured Technology Landscape

  • Audit access controls and IT change management policies
  • Confirm data backups, restoration protocols are robust
  • Check network security mechanisms like firewalls, encryption
  • Review controls against data theft, leakage

5. Prudent Strategic Growth

  • Reality test risks in feasibility studies for market expansion
  • Assess department readiness to support new products
  • Analyse capital requirements for scale up or M&A activities
  • Review post-investment performance against targets

This widespread coverage enables comprehensive governance.

Why is Internal Audit Considered Critical?

Here are 5 compelling reasons why every company should invest in internal audit:

1. Enables Tighter Process Governance

  • Regular evaluations ensure activities stay compliant and efficient

2. Facilitates Higher Cost Optimization

  • Analysing budgets and spend helps target wastages in time and resources

3. Enables Organization-wide Risk Mitigation

  • Identifying gaps proactively prevents financial, legal or reputational losses

4. Brings Prudence Into Growth Planning

  • Independently stress testing business cases injects pragmatism

5. Builds Credibility with Stakeholders

  • Well-governed structures inspire confidence in customers, investors and partners

While internal audit costs may appear high, the long term visibility into preventing breakdowns makes it invaluable.


To summarize, internal auditing provides in-depth oversight across vital organizational areas through unbiased eyes. This equips leadership with an early warning system to address issues before they spiral while driving efficiency gains.

A risk-focused annual internal audit plan is a strategic investment that forward-thinking enterprises proactively embrace.


What is an internal audit?

An internal audit is an independent, objective assurance and consulting activity designed to add value to and improve an organization’s operations. It helps companies identify risks, evaluate controls, and ensure compliance with policies, laws, and regulations.

Why is an internal audit important for UAE companies?

In the UAE, companies across sectors have to follow stringent governance and compliance rules. Having robust internal audits helps them continuously monitor risks, reduce fraud, strengthen operational processes, and fulfil legal responsibilities as per norms defined by entities like the Abu Dhabi Accountability Authority (ADAA) and Dubai Financial Services Authority (DFSA).

What are some key areas UAE internal audits focus on?

Typical areas of focus include financial statements; internal financial controls; risk management; operational efficiency; compliance with policies, laws, and regulations; procurement processes; IT and cybersecurity; data management; and third-party vendor management.

Do all UAE companies require an internal audit function?

Per legal requirements in the country, public joint stock companies, banks, insurance firms, and other licensed financial entities in the UAE must have internal audit functions. Additionally, companies in special economic zones may require them. Private companies often establish internal audits on an elective basis.

What standards guide internal audits in the UAE?

Relevant international standards like the International Professional Practices Framework (IPPF) by the Institute of Internal Auditors provide overarching guidance. Additionally, UAE authorities like the ADAA and DFSA define local standards for internal audits within their purview to align with global best practices.

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Pranav Modi

Mr. Pranav Modi, CA is supported by 12+ years of Consulting, Auditing and Accounting practice across diverse sectors.

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