Internal audit work costs money and should therefore provide benefits to justify the costs. The justification for internal audit may come from:
- Improvements in financial controls or operational controls within the entity
- Improvements in compliance with key laws and regulations, thereby reducing the risk of legal action or action by the regulators against the entity
- Improvements in the economy, efficiency or effectiveness of operations There may be other benefits of internal audit.
- If the internal auditors carry out checks into the effectiveness of financial controls within the entity, the external auditors may decide that they can rely to some extent on the work done by internal audit. This would save time and effort when carrying out their own audit work. If the external auditors do rely to some extent on the work of internal audit, there may be a reduction in the external audit fee.
- The existence of an internal audit department may enhance the reputation of the entity for sound corporate governance in the opinion of customers and investors.