Internal controls serve the purpose of setting internal guidelines and processes to regulate various matters of financial and operating nature. Relying on internal controls can increase the effectiveness of audit as the basic framework for audit, proper documentation and systems for maintaining records is already in place (Broek).
During an audit, reliance on internal controls can serve the purpose of a prototype on which the audit can be built on. However, the internal controls first need to be validated and verified to ensure that they are serving their purpose.
The effectiveness of the audit increases when internal controls and audit reviews can throw up instances which would enhance the control system of the firm. Such instances would otherwise have to be identified in external audit. Early warning about such instances can help in increasing the focus of external audit on areas that require special attention (Broek).
Internal controls can significantly enhance the efficiency of the audit. Once proper internal controls are in place, it helps the external auditor to rely on the processes and results of such controls. These enable the auditor to spend less time covering a vast breadth of assessment areas and focus more on the problem areas (Nissley).
The efficiency and profitability of the external audit can be further enhance by continuous and timely interaction with those responsible for enforcing and monitoring internal controls. This process can provide specific and readymade insights which can help in better management of resources during the audit (Nissley).
References
Broek, R. J. The Benefits of the Internal Audit. Withum. Retrieved from http://www.withum.com/kc/benefits-internal-audit/.
Nissley, E. Measuring Internal Audit Effectiveness and Efficiency. McKonly & Asbury. Retrieved from http://www.macpas.com/measuring-internal-audit-effectiveness-and-efficiency/.
