Differences between Internal Check and Internal Audit

25/07/2020 0 By indiafreenotes
  1. Meaning

  • Internal Check is an arrangement of duties allocated in such a way that the work of one person is automatically checked by another.
  • Internal Audit is an independent appraisal of the operations and records of the company.
  1. Object

  • The purpose of Internal Audit is to detect the errors and frauds which have already been committed.
  • The purpose of Internal Check is to prevent or minimize he possibilities of errors, frauds or irregularities.
  1. Need for separate staff

  • For carrying out Internal Audit, a separate staff of employees is engaged for the purpose.
  • For internal check, no new appointment is made. It, in fact represents only the arrangement of duties of the staff in a particular way.
  1. Nature of work

  • The work involved in the Internal Audit is just like that of a watch man. Internal auditor has to report, from time to time, to the management about the various in efficiencies and suggest improvements. It is also his duty to see that the internal check system does not become static.
  • Internal Check, on the other hand, represents a process under which the work goes on uninterruptedly and the checking too is more or less automatic.
  1. Timing of work

  • Internal Audit starts when the accounting process of different transactions is finished.
  • Internal Check is an operation during the course of transaction.
  1. Internal audit

  • It is a device for checking the work, whereas
  • Internal check is a device for doing the work.
  1. In Internal Audit Errors and Frauds are detected after the completion of work, whereas in Internal Check the Errors and Frauds are discovered during the course of work.
  2. Scope of work

  • The scope of Internal Check is very limited.
  • The scope of Internal Audit is comparatively board.
  1. Involvement

  • A large number of employees are needed for the implementation of Internal Check System.
  • Whereas, a much smaller number of persons are needed for implementing Internal Audit implementation.

Differences between Internal Check and Internal Audit

If you want to successfully manage risk, it helps to use the correct risk terms and expressions. Many people use risk terms without realizing that they may not be using the right terminology. It’s easy to become confused because sometimes the field of risk management uses similar terms for different purposes. For example, “Operational Risk Management” has a different meaning in the banking and insurance industry, compared to other industries (oil & gas, mining, manufacturing, chemicals, etc.).

Similarly, the term “audit” can refer either to an internal audit conducted by an organization itself, or an external audit performed by an auditing firm hired by the organization. Some people confuse the two when using the term “audit”. This is important because an internal audit and external audit may assess different things, and have different frameworks and workflows.

Internal Audit is a Function Performed at Specific Times

Many people in risk management use this simple formula to explain the difference between Internal Audit and Internal Control: Internal Audit is a function, while Internal Control is a system. Internal audits are performed at specific times to assess:

  • If the company has a good understanding of the risks that it faces
  • If the controls put in place to mitigate risks are effective.

There is one very important distinction to be made: it is not the job of internal auditors to identify risks, nor to specify the controls that are needed. Internal Audit evaluates whether the process leading to the identification of risks is working well, checks whether controls already in place are working according to the way they are intended to, and evaluates an organization’s governance system and process.

Internal Control is an Ongoing System

Internal Control is made up of procedures, policies and measures designed to make sure that an organization meets its objectives, and that risks that can prevent an organization from meeting its objectives are mitigated. While the Internal Audit function is performed by internal auditors, Internal Control is the responsibility of operational management functions. Another point of contrast is frequency. An internal audit is a check that is conducted at specific times, whereas Internal Control is responsible for checks that are on-going to make sure operational efficiency and effectiveness are achieved through the control of risks. Some risk experts even say that Internal Control is a part of a company’s day-to-day management and administration.