Advantages And Disadvantages Of Internal Audit

In this tutorial, we will learn about the advantages and disadvantages of internal audit is helpful to have sufficient control over business activities.

The significant advantages and disadvantages of internal audit can be studied as follows:

Proper Accounting System: 

The benefit of an internal audit is that an appropriate system of accounting is introduced. The accounting system is a chain of activities in an entity by which transactions processed for maintaining financial records. There is a need for orderly devices to achieve desirable results.

Better Management: 

The benefit of internal audits is that there is better management of business concerns. The auditor can achieve the goals of the business can be achieved if there is a proper internal control, internal check, and internal audit.

Effective Control: 

An environmental audit is helpful to have sufficient control over business activities. Power is the management function, which is related to the supervision and direction of ongoing operations. The manager concerned can remove the difficulties for the smooth working of the business.

Progressive Review: 

An internal audit is beneficial to review the progress of a business concern. The figures for the previous year compared with this year. Moreover, similar companies’ performance results can analyze to determine the progress made by the entity. The management can review the progress for internal control.

No Error And Fraud: 

The internal audit uses to protect accounting records from errors and fraud. Accounting and auditing go side by side when accounting work is over; the review will start. In situation errors and fraud committed by the accounting, staff will easily be detected and rectified.


Internal audit is helpful to investigate the business matters. An internal auditor can ask to examine the facts and figures to confirm or clear any doubt in case of doubt. The internal auditor can investigate the matter in any manner.

Fixing Responsibilities: 

The internal audit uses to set the responsibility of people having poor performance. Establish management performance standards. The internal auditor can evaluate the result of all persons. The people can be held responsible for below standard work, and action can be taken against them.

Performance Improves:

An internal auditor helps improve the performance of the organization. The achievements of the previous year are the basis for preparing the budget for the next years. The projected income statement and balance sheet are drawn up. An attempt is made to get a positive result.

Helps External Auditing: 

An internal auditor’s work performance can help external auditors carry out the audit. The audit procedure of internal and external inspection is almost the same. The auditor can go through the internal audit report at the time of starting audit work. Anyhow external auditor is responsible for the external audit.

Division Of Work: 

The internal audit is helpful to apply the division of labor. The division of labor is necessary to watch the activities of employees, including management. The auditor can suggest the way and means improve the performance of a business.

Proper Use Of Resources: 

An internal audit uses to check the appropriate use of resources. The misuse of funds can increase the cost of the organization. The optimum use of resources can be determined to control the value of output. In this way, an internal audit is a tool to use the funds in the business’s best interest.

Limitations Or Disadvantages Of Internal Audit:

The various limitations of internal audit are as follows:

Staff Shortage:

The weakness of internal audit is the staff shortage. There may be a need for reasonable audit staff to examine the record. The lack of staff is a hurdle to get the benefit of an internal audit.

Time Lag: 

The limitation of internal audit is that it starts when accounting ends. Thus there is a time lag between recording and checking of entries.

An audit program is a set of instructions that are to follow for the proper execution of audits. A detailed written audit program containing the various steps and procedures shall require after the development of the audit plan. The audit program includes the measures that are generally employed to determine what and how much evidence must be collected and evaluated. 

It also lays down the responsibilities for the whole audit team for carrying out different tasks. The prepared audit program may be revised if needed by the prevailing circumstances. An audit plan largely depends on the size of the organization and other relevant factors. Minimum essential work to be done in the standard method and rest is according to the circumstances. The audit program is documented in the audit working papers, which are the official records which contain the planning and execution of the audit agreement.