Significance of internal auditing in risk management of short-term debt servicing

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Modern aspects of internal auditing already stated in the 21st century definition of internal auditing, indicate that internal auditing activities take part in the production of added value. Effective risk management is a source of added value. The economic crisis has turned liquidity risk into a liquidity crisis, necessitating more responsibility of internal auditing in the planning and ranking of the areas subject to auditing, based on the level of risk, thereby foregrounding liquidity. Internal auditing, through reassurance and advising (bearing in mind professional practice), makes a significant contribution to managing liquidity risk. In the case of insufficient funds, there arises the impossibility of placements and investing i.e. the impossibility of an increase in financing from external sources. This situation must be overcome and the financial gap must be closed by reducing the debt recovery for buyers, cutting down on tied selling, as well as by extending the deadline for repayment of liabilities to suppliers. Curtailing the cycle of reporting, processing and submission of documentation allows for early payment with the possibility of additional discounts.