Business analysis of companies and banks is carried out using financial reports. Audit is a procedure that verifies and evaluates reports, methods and gives a professional and independent opinion. According to the auditing subject it can be divided into national, internal and external audits. By advancing technology in the banking system, the use of internal auditing is becoming increasingly bigger in all banks regardless of their size. With the increase of business, it is necessary to minimize the risk formation, because it ensures the security of growth and development of all business activities. The relationship between the supervisory body and the internal audit should be based on good communication, because without such communication, the internal auditor cannot make decisions about events with which he or she is unfamiliar and thus cannot influence the risk minimization. Internal audit as a component of banks is an aid to management and as such it has the task of analyzing, harmonizing, evaluating and examining the entire banking business. Internal auditors through their work should be independent in order to make objective remarks and recommendations, so such monitoring of the system can eliminate mistakes and frauds in business more safely. Internal auditors have been given the option of additional education by introducing new legislation. Internal auditing can be formed as an independent department or as a component of an existing department within an enterprise, part of a finance department, controlling, accounting, and so on. Internal audit work has to be planned and controlled, so there are three types of internal audit plans: long-term, short-term and functional plans. The internal audit report is compiled at least once a year. A bank as a financial institution must carry out all of the above mentioned components. By joining the European Union, the Republic of Croatia, together with Croatian banks, had to align its internal audit with the rules that were prescribed by law. Internal audit has been improved by such regulations, in terms of stricter monitoring and control. The scope of internal audit is developing and expanding, so today's internal audit has become an irreplaceable internal control mechanism.