What is the purpose of an internal audit?

The purpose of an internal audit is primarily to monitor compliance and operational efficiency within an organization. Internal audits are conducted to evaluate the effectiveness of risk management, control processes, and governance practices. They help ensure that the organization adheres to internal policies and external regulations, and identify areas where improvements can be made.

This process involves assessing the organization’s operations and evaluating whether they are being conducted efficiently, economically, and effectively. By examining the processes and controls in place, internal auditors provide insights into how operations can be improved, leading to greater overall effectiveness.

While preparing external financial statements, assisting with investment decisions, and filing tax returns are important functions, they do not align with the primary focus of internal audits. Internal audits specifically aim to enhance the organization’s operational efficiency and compliance, which is why the correct answer is centered on monitoring these aspects.