Entering internal audit for the first time can feel intimidating - whether you're a fresh CA, an article
assistant, or a finance analyst preparing for your first assignment. A structured internal
audit checklist is what separates anxious first-timers from confident professionals who
know exactly what to look for, where to start, and how not to miss critical internal control risks.
This guide is a professional yet beginner-friendly roadmap - written from the perspective of
someone who
has seen how Big 4s, internal audit firms, and corporate finance divisions actually execute audits. It
not only covers the internal auditing process checklist, but also how a fresher is expected to
think while auditing.
What Is an Internal Audit? (Quick, Practical Definition)
An internal audit is a review of the operations and processes of a company and the internal controls in a
systematic, independent manner. It aims at compliance, reduction of risks, and efficiency. Internal
audit involves the use of in-house personnel (or independent teams contracted by executives) to offer
assurance and enhancement.
Having a properly performed internal audit will assist you:
- Early detection of inefficiencies or control weaknesses.
- Make sure the laws, standards, and company policies are followed.
- Identify possible fraud or mismanagement.
- Enhance internal controls and governance.
And, in case you are new to the field, consider internal auditing to be detective work and performance
tuning in one; you are discovering what is wrong, and you are enabling the business to perform more
efficiently.
Unlike statutory audits, internal audits are not just about financial accuracy. They assess
operational
discipline, process integrity, and control risk exposure.
If you've heard about the ICAI internal audit checklist, this blog acts as a simplified
beginner internal
audit guide before you jump into institute-level documentation.
Why Do You Absolutely Need an Internal Audit Checklist? (Especially as a Beginner)
Most audit mistakes happen not because people don't know audit, but because they miss structured
flow.
A proper internal audit checklist:
- Prevents missing critical control checks
- Keeps your testing sequence professional and organized
- Makes your documentation & working papers audit-review-ready
- Reflects maturity - even if it’s your first audit
- Saves you from “I forgot to ask for that document” situations
Audit Preparation Checklist (Before You Start)
The half battle is preparation. Never begin testing or reviewing documents before these basics are ready.
To prepare this audit, start with the following audit preparation checklist:
1. Specify Audit Objective and Scope:
Specify what you are auditing - department, process, or function? Be clear on what you want
to achieve so
that you do not lose focus.
2. Learn the Organization:
Review policies, standard operating procedures (SOPs), past audit reports, and process maps.
The more you
know about the organization, the more efficient your audit will be.
3. Determine Significant Risks and Controls:
All processes carry their own risks. Identify them at the first stage, and determine the
controls that
are supposed to be applied in order to reduce those risks.
4. Develop an Audit Plan:
Develop an organized strategy of what, by whom, and when is to be audited. This involves
resource
scheduling and plans.
5. Interact with Stakeholders:
Inform the appropriate departments and owners of the processes of the upcoming audit. Define
expectations
and clarify the reason why - this creates cooperation and not fear.
This step is where Big 4 seniors silently judge your professionalism - your readiness matters more
than
your questions.
Step-by-Step Internal Audit Checklist for Beginners
Let’s walk through a practical internal auditing process checklist that’s ideal for beginners. Each step
represents a crucial stage in performing a professional audit from start to finish. Follow this in the
exact professional audit sequence - this is how internal audit teams work.
Step 1: Understand the Process - Never Start by Asking for Documents
A smart beginner asks for a process walkthrough before asking for samples.
Sit with the process owner and ask:
- “What is the approved process flow?”
- “What actually happens daily - real scenario?”
- “Who has approval authority - any exceptions allowed?”
This sets a professional tone and builds trust.
Step 2: Identify Key Risk & Control Checkpoints
Every process has control points where risk can occur.
Examples:
| Business Area |
Risk Area |
Control to Verify |
| Purchases |
Fake vendors |
Vendor master approval governance |
| Payroll |
Ghost employees |
Attendance sync with payout |
| Inventory |
Quantity manipulation |
Physical vs ERP stock reconciliation |
| IT Access |
Unauthorized changes |
Role-based access, approval trail |
This is what the Big 4 calls “control understanding”, critical before testing.
Step 3: Perform Evidence-Based Testing (Not Verbal)
Never trust “haan sab set hai.”
Ask for samples:
- Purchase invoices (random / high-value / related-party cases)
- GRN vs invoice vs PO - 3-way match
- Bank payment advice
- Salary payout report vs attendance system
- Stock count sheet vs ERP stock
Testing rule: If the process is perfect but email tells a different story - you record the
truth, not
the theory.
Step 4: Document Observations - In Audit Review Format
Your internal audit is only as good as your documentation.
Observation should include:
- Issue observed
- Risk impact (financial, fraud, compliance, reputation)
- Evidence reference
- Recommendation (not just problem highlighting)
Tip: Never write findings like a police FIR - write them like a responsible process advisor.
Step 5: Closure & Alignment
Close with a discussion - not shock value.
Ask the process owner calmly:
“Here’s what we noticed - do you agree, or is there any justification before closure?”
Companies value auditors who are part of solutions, not just fault finders.
Sample Internal Audit Checklist
| Area |
What to Verify |
Sample To Check |
| Vendor Onboarding |
Was the vendor KYC verified & approved by an authorized person? |
Vendor master file, approval email |
| Expense Reimbursement |
Was the expense limit followed & supported by proofs? |
Expense claim, manager approval, bill |
| Inventory |
Does physical stock match ERP stock? |
Stock audit sheet + ERP snapshot |
| IT Access |
Are access rights role-wise & reviewed periodically? |
Access matrix, user request form |
| Bank Payments |
Was payment made only after dual approval? |
Payment voucher + bank statement |
This internal audit sample checklist is what you can directly use in Excel or Sheets.
Critical Tips for Beginners (What Big 4 Seniors Expect)
- Ask WHY - not just WHAT
- Maintain a neutral, respectful tone during questioning
- Tag and name every document evidence professionally
- Always keep your working papers review-ready
- Don’t wait until the end to request pending data
- Don’t correct employees - you ARE NOT supervisor
- Don’t write vague statements like "looks wrong" - state fact + risk
This is the difference between average interns and future IA leaders.
Common Mistakes First-Time Auditors Should Avoid
Beginners tend to commit the following mistakes even with the best intentions:
1. Omitting documentation:
All discoveries have to be supported by evidence.
2. Excessively complex checklists:
Be simple and pertinent with your audit focus.
3. Lack of effective communication:
An ineffective report compromises effective fieldwork.
4. Forgetting follow-ups:
Improvements do not get going without follow-ups.
These are some of the mistakes that should be avoided, and your audits will have the respect and
results.
Why Follow the ICAI Internal Audit Checklist?
The ICAI internal audit checklist is very popular in India and complies with the international
standards
of auditing. It helps beginners:
- Check completeness and accuracy.
- Follow a systematic process
- Be consistent in audits.
- Observing professional ethics and documentation.
In case your organization is controlled or has strict compliance standards, being in line with ICAI
standards brings credibility and organization.
Recommended Learning: Internal Audit Practical Course
If you want a hands-on learning environment that simulates real audits before going on-site, opt for
an
internal audit practical course (preferably those offered by ICAI, Grant Thornton, or reputed
mentors).
This helps you understand:
- Working paper formats used in real firms
- Audit report writing
- Control testing approach
- How corporate IA teams think during audits
It’s far more valuable than reading theory PDFs.
Conclusion
Your first internal audit doesn’t have to be stressful - as long as your internal audit checklist is
structured, preparation-first, and evidence-driven. Following a professional, step-by-step
approach
builds credibility instantly - irrespective of your age or experience level.
Internal audit isn’t just about finding gaps - it’s about improving business strength. If you
understand
that from Day 1, you won’t just perform audits - you’ll grow into leadership.
