As we saw in our last blog post audit management is extremely important. Let us now look at what internal audit is.
Auditing is done to officially inspect an organization and its workings. Internal auditing, is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The role of internal audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively.
Internal auditing is a catalyst for improving an organization’s governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.
Internal auditors deal with issues that are fundamentally important to the survival and prosperity of any organisation. Unlike external auditors, they look beyond financial risks and statements to consider wider issues such as the organisation’s reputation, growth, its impact on the environment and the way it treats its employees.
In sum, internal auditors help organisations to succeed. It is done through a combination of assurance and consulting. The assurance part of the work involves telling managers and governors how well the systems and processes designed to keep the organisation on track are working. Then, consulting is offered to help to improve those systems and processes where necessary.
The job of internal auditors is to provide an unbiased and objective view. they must be independent from the operations we evaluate and report to the highest level in an organisation: senior managers and governors. Typically, this is the board of directors or the board of trustees, the accounting officer or the audit committee.
To go into the differences between external and internal audits, external auditors report to shareholders or members who are outside the organisations governance structure whereas the internal auditors report to The board and senior management who are within the organisations governance structure. The basic objective of external audits is to add credibility and reliability to financial reports from the organisation to its stakeholders by giving opinion on the report. Internal audits evaluate and improve the effectiveness of governance, risk management and control processes. This provides members of the boards and senior management with assurance that helps them fulfil their duties to the organization and its stakeholders.
External audits mainly concentrate on financial reports, financial reporting risks. Internal audits, however, cover all categories of risk, their management, including reporting on them. External audits have no responsibility for improvement but only have a duty to report the problems. Improvement is fundamental to the purpose of internal auditing. But it is done by advising, coaching and facilitating in order to not undermine the responsibility of management.
By reporting to executive management that important risks have been evaluated and highlighting where improvements are necessary, the internal auditor helps executive management and boards to demonstrate that they are managing the organization effectively on behalf of their stakeholders. This is summarised in the mission statement of internal audit which says that internal audit’s role is ‘to enhance and protect organizational value by providing risk-based and objective assurance, advice and insight’.
Hence, internal auditors, along with executive management, non-executive management and external auditors are a critical part of the top-level governance of any organization.
Software tools like VComply allow you to add auditors such that auditing can be carried out simultaneously, therefore saving a lot of time.Add to favorites