Abstract:

Internal control in the audit process gains much attraction from the last few decades. One basic needs to understand the audit process is to understand the internal control of business organizations. Auditors cannot express and present their true opinion unless they do not understand the mechanism and system of internal control. The need to understand the system of internal control develops when audited financial statements used more for decision making for stakeholders.

The main objective of this paper is to emphasize the concept of internal control and its significance to comprehend the audit process. Further, the history of internal control with the auditing framework is also in discussion. This paper is based on the theoretical approach where the concept of internal control discussed the external audit process. This paper does not cover internal audits in the discussion, the discussion and concepts are limited to external auditing.

Analysis of internal control in the audit process is an important concern for auditors to express their opinion and provide assurance services. Good and strong internal controls are essential to assuring the accomplishments of goals and objectives. They provide reliable financial reporting for management decision making. They ensure compliance with applicable laws and regulations to avoid the risk of public scandals. Poor or excessive internal controls reduce productivity, increase the complexity of the transaction and finally add no value to certain activities. Good internal controls help ensure efficient operations and protect organization image.

This paper concluded the essentiality of the internal control system in the audit process as well as its urgency for meeting organization goals and objectives. It is recommended that internal controls should be proactive, and value-added. It plays a significant role in the auditing process and the report of external auditors based on the understanding of the internal control mechanism. The report of external auditors’ further guides to stakeholders in their decision-making process. If it does not depict the true picture, then it damages the integrity of financial reporting.