The Internal Audit Function
'The audit committee should review and monitor the adequacy of the internal audit activities. Where there is no internal audit work, the review committee group ought to consider every year whether there is a requirement for an internal audit and make a suggestion to the board, and the explanations behind the nonappearance of such a capacity ought to be clarified in the relevant area of the annual report.
Internal audit can play an important assurance role in an organization's governance processes, especially in the zone of hazard administration and control. In numerous associations, the desires set upon internal audit have expanded and the capacity is being depended on to make a critical commitment.
It is important
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The Code of Ethics is based on the following four principles:
• Integrity • Objectivity • Confidentiality • Competency
In a few cases, having IAF staff expressly pronounce yearly that they would follow the standards of Code of Ethics has been referred to as a best practice.
Quality of audit staff
Some IAFs were advised to provide further consideration in their training plans of staffs to develop certain knowledge, expertise and skills. Every individual audit professional’s responsibilities is to maintain and upgrade their competencies.
Internal Auditors as Consultants
Internal auditors can provide a variety of consulting services to the company’s board of directors, the audit committee, management, and other personnel at all levels.
1) Consulting services to the board of directors and audit committee.
2) Consulting services to management.
3) Internal auditor training services.
Authorities and Responsibilities of Internal Auditors
The internal audit function should have full and free access to the company’s audit committee; unrestricted access to the company’s records, documents, property, and personnel; and authority to discuss initiatives, policies, and procedures regarding risk assessment, internal controls, compliance, financial reporting, and governance processes with management and other corporate governance
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
Interests: The external auditors ensure that quarterly and annual financial statements are prepared in accordance to GAAP and that they themselves and the company follow professional standards
Due to the lack of qualified and engaged auditors, Ventra Ionia needs to evaluate their current audit program. There are many structures the audit team can take. Does Ventra want to hire a few full-time employees whose only responsibility would be to audit the various processes within the factory? Does Ventra want to conduct an internal auditor training to develop current employees? Does Ventra want to create a partnership with other factories in the area or sister plants to create a co-sourcing or consortium arrangement? Does Ventra want to hire an outside company to conduct all internal audits and outsource the process? There are many options Ventra could choose. The following two options are suggestions Ventra could use to develop their internal audit program.
Internal controls provide foundation for successful and safe organization. Information listed in this brief will provide management some insight into the internal controls and some risk organization should be aware off.
Objectivity also needs to be evaluated to make sure the internal audit is reliable. The internal audit needs to be free of conflicting responsibilities as well
It is important to test internal controls, in many cases audit fails due to lack of identifying the key control that must be tested by engagement team. Also the audit fails if wrong control was
The seven best practices in the roles and responsibilities of an internal audit function include:
An auditor needs to follow, abide and comply with the standards, rules and regulations of their profession, as these will help the auditor to recognize when independence and objectivity are compromised. Works Cited Gray, Iain and Stuart Manson. The Audit Process: Principles, Practice and Cases. London: Thomson Learning, 2008. Print.
As good risk management can not only help to keep company’s established value, they can also assist in capitalizing and identifying to create value. According to principle 7 recommend to have an internal audit faction, the role of internal auditor is to help the board monitor and manage risk directly.(ASX 2014).
recommendation is for auditors to be alert when performing the audit, there may be information found
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
Audit Risk is the risk that an auditor has stated an incorrect audit opinion on the financial statements. It may cause the auditors fail to alter the opinion when the financial statements contain material misstatement. The auditor should perform the audit to lower the audit risk to a sufficiently low level. In the auditor’s professional judgement, the auditor should appropriately state a correct opinion on the financial statement
The fundamental duty of an external financial auditor is to form and express an opinion on whether the reporting entity’s financial statements are prepared in accordance with the relevant financial reporting framework. In discharging this duty, the auditor must exercise “reasonable skill, care and caution” (Lopes, J. in Kingston Cotton Mill Co 1896) as reflected in current legal and professional requirements.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.
Sometimes it's good to step back and think money. This means that its good to make a personal financial audit two to four times a year, to keep money matters in control. Procedure for personal financial audit is check - measure - readjust. For best result one can keep a record on financial matters, this makes it easier to compare the current situation to the past.