GN & Company, a newly established firm of Company Secretaries, has been appointed as internal auditors of a large manufacturing company. Partners of the firm have no prior experience of handling such large internal a

Obtaining Knowledge of the Client's Business and its Environment Effective planning is the key to success for every project. It is essential for every Internal Auditor to prepare an effective audit scope and plan to focus on most essential activities and transactions, which is not possible without obtaining a good understanding of the business strategy, its operations, its organization structure, locations and offices, product and business segments, financial overview of the business, applications statutory compliances and various other internal and external factors impacting the organization. Internal Auditor must plan and conduct meetings with various stakeholders including Board of Directors, Senior management person, Head of Departments and other business associates and partners to obtain understanding of the organization's business environment, organization's vision, mission and top management's expectations from the audit functions. Following steps may be followed for obtaining the knowledge of the Business and its environment. The internal auditor should obtain a level of knowledge of the entity sufficient to enable him to identify events, transactions, policies and practices that may have a significant effect on the financial information. Following are some of the sources wherefrom the internal auditor can obtain such knowledge: Organization's policy and procedures manual & its ownership and governance structures. The entity's structure and how it is financed. - Annual financial statements and annual report. Minutes of the meetings of the shareholders, board of directors, and important committees of the board such as the audit committee, remuneration committee, shareholders' grievances committee. Legislation and regulations that significantly affect the entity. Management reports/ internal audit reports of prior periods. Newspaper/ industry journals & Discussion with client's management and staff. Visits to entity's plant facilities etc. to obtain firsthand information regarding the production processes of the entity. Visits to the entity's department where the accounting and other documents are generated, maintained, and the administrative procedures followed. Internal auditor must also obtain understanding of the underlying Information Technology landscape, various applications and ERP systems of the organization and Management Information System of the organization.