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tutorial on internal auditing
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Introduction
Internal Audit is an independent objective assurance and consulting activity designed to add value and improve operations. It helps accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.
Internal Audit is organized to examine and evaluate current and proposed processes and controls. The objectives of Internal Audit are to:
1. Promote effective and efficient controls through audits, reviews and objective consulting arrangements.
2. Pursue effective corrective action to the root cause of significant issues.
3. Assist Senior Management in the effective discharge of their duties by furnishing them with analysis, appraisals
All employees are requested to assist Internal Audit in fulfilling their audit, review and consulting activities. Internal Audit will also have free and unrestricted access to the Senior Management and/or other regulatory agency. Documents and information given to Internal Audit during a review will be handled in the same prudent and confidential manner as by those employees normally accountable for them and as require by regulation.
Responsibility
The scope of Internal Audit encompasses the examination and evaluation of the adequacy and effectiveness of the organization 's governance, risk management and control systems. In addition, Internal Audit will examine and evaluate the quality of performance in carrying out assigned responsibilities to achieve the organization 's stated goals and objectives. More specifically the scope will include:
1. Reviewing the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such
At a minimum, those general audit procedures will include guidance related to audit planning, scheduling, risk and control assessment, reporting, and accountability.
Quality Assurance and Improvement Program
The Director of Internal Audit will develop a quality assurance and improvement program that complies with the Standards. An external quality assessment will be conducted at least once every five years.
Periodic Assessment
On an annual basis, the Director of Internal Audit will assess whether the purpose, authority, and responsibility as defined in this charter, continue to be adequate to enable Internal Audit activity to accomplish its objectives. The result of this periodic assessment should be communicated to Senior
“Fifth, the company should audit the whole process frequently to ensure compli- ance with these procedures.”
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).
What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and to make sure that the accounting is done correctly and truthfully.
Evaluating is the strategy of investigating & examining any part of a business, whether money related or non-fiscal. Inspectors are completely prepared to spot regions of required change, potential dangers and occurrences of deceptive direct in their general vicinity of adroitness. Reviews can disturb the ordinary stream of business in an organization, yet the capability to spot and location potential shortcomings generally exceed any transitory misfortunes of gainfulness. Around the extent of issues reviews can audit are human assets approaches, operational strategies, and quality or security arrangements and, obviously, bookkeeping reviews.
A good internal audit mechanism helps in detecting the frauds at an early stage so that the financial losses may be minimized. Operational audits can be taken up to review the effectiveness, efficiency, and economy of operation. It helps in identifying the risks faced by the organization and has an opportunity to improve controls. The external auditor should also try to obtain sufficient and appropriate audit evidence to be able to draw reasonable conclusions using which audit evidence is provided. Sudden checks have to be planned by the management to keep the staff alert and updated. The audit unit should be established separately, and proper vigilance and guidance are to be provided to them in order to check the frauds at an early stage. The staff, management and the executive officers of the organization have to work for the common good of all the stakeholders of the organization and should follow moral and ethical values while carrying on their
Internal audit is done by a selected team within the organisation. The trained staff not directly responsible for what is being audited are recruited to conduct the internal audit. The various records that are reviewed in an internal audit are procedures and policies, training records, observation of process etc.
The seven best practices in the roles and responsibilities of an internal audit function include:
This will be done over a short amount of time compared to the pre-audit phase. Full attention will be put on the audit. The first part of the audit is always the opening conference. This is where the auditor will communicate with everyone that has stake in the audit. Anybody has is under the scope of the audit and will be correcting deficiencies needs to attend. Communication on audit phases, audit scoring and arranged meetings need discussed. The next part of the audit is to conduct a tour of the whole facility to become acquainted with it. Then before the actual inspection of the facility it is best to sit down and do a review of the documentation. The auditor will go through written programs and supplemental information relating to those programs. This can be time consuming so ensuring that this is communicated properly during the pre-audit is key. After the review comes the actual facility inspection. The auditor will inspect every area of the facility covered under the scope. Employee interviews can be conducted either during the inspection to act as a break or all together following the inspection. Following the interviews some training may occur. The auditor may train managers on how to better manage issues under the scope of the audit. Then follows the closing conference where all the stakeholders from the opening conference come together to discuss the findings of the audit and the
In this approach, the focus will be on the internal control objectives so that the control design can be well assessed. First, the auditor will define the control measures and objectives and then find out which measures already installed meet the objectives (Tyrer, 1994).
The International Standard on Auditing (ISA) 330 offers some details regarding the purpose of the audit procedures.
Internal management defined in accounting and auditing is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization. It is a means by which an organization's resources are directed, monitored, and measured. It plays an important role in detecting and preventing fraud and protecting the organization's resources, both physical and intangible.
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
Audit is a process to evaluate and review the accounts and financial statement objectively. We can divide it into internal auditors and external auditors. Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco...
Internal control Audit is The Internal Audit function is responsible for providing an independent appraisal of the University's activities, both financial and
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.