Internal Audit Function

Objectively evaluating risks, analyzing and assessing processes and systems for efficiencies, doing spot-checks for as-yet-unknown issues, and keeping departments aligned and meeting business objectives are all important ways that auditors can bring value. To remain objective, your internal auditor or team cannot have any operational responsibility. In cases where resource constraints impact smaller companies, it’s acceptable to cross-train employees in different departments for auditing purposes. By providing an independent and unbiased view, the internal audit function adds value to your organization. Internal auditors are not responsible for the execution of company activities; they advise management and the board of directors (or similar oversight body) regarding how to better execute their responsibilities. As a result of their broad scope of involvement, internal auditors may have a variety of higher educational and professional backgrounds.

Strict rules about facetime and office hours are becoming obsolete and are a barrier to bringing in talented team members. Instead, emphasize individual growth and learning and a commitment to work-life balance. In case the company has an internal audit in place, the detection of fraud becomes much easier. Following are the steps about how continuous improvement can be achieved through audit findings.

Isaac enjoys helping his clients understand and simplify their compliance activities. He is attentive to his clients’ needs and works meticulously to ensure that each examination and report meets professional standards. An internal audit can be extremely useful to help streamline processes, find gaps, and identify fraud. My experience as an auditor has taught me to recognize the red flags that can quickly derail the process.

1. This mostly includes adherence to contract terms with the general contractor, sub-contractors, or standalone vendors as necessary.
2. And in case of special transactions like sale, purchase or revaluation of the asset, the authorization of this is also audited in an internal audit.
3. Isaac enjoys helping his clients understand and simplify their compliance activities.
4. In addition to ensuring that a company complies with laws and regulations, internal audits also provide a degree of risk management and safeguard against potential fraud, waste, or abuse.
5. Internal audit results will be used by the management team to improve operations, processes, or more, while external audit results are used by outside investors.
6. The final report may also communicate next steps in terms of changes to be implemented, future monitoring processes, and what future reviews will entail.
7. Security and technology audits evaluate an organization’s information technology systems and the underlying infrastructure to assess the accuracy and/or security of data and information or intellectual property.

Ensures Compliance with Laws and Regulations

An internal audit focused on technology reviews the controls, hardware, software, security, documentation, and backup/recovery of systems. The goal is likely to assess general IT accuracy and processing capabilities. As companies become continually more environmentally conscious, some take the steps of reviewing the business’ impact on the planet. This results in an internal audit covering how a company safely sources raw materials, minimizes greenhouse gases during production, utilizes eco-friendly distribution methods, and reduces energy consumption. Companies leveraging triple bottom line reporting may perform internal environmental audits as part of annual reporting. A company may be required to adhere to local laws, compliance needs, government regulations, external policies, or other restrictions.

Assessing the Competence and Objectivity of the Internal Auditors

Internal auditors follow the standards set forth by The International Professional Practices Framework (IPPF) supported by The Institute of Internal Auditors (IIA). By objectively reviewing your organization’s policies and procedures, you can rest assured you are following those policies and procedures appropriately, and that they adequately mitigate your company’s unique risks. The 2024 update to the Code further highlights the need for a robust internal control and risk management framework, including a requirement for the Board to declare that material controls have operated effectively. The decision to establish an internal audit function is typically left to a company’s management and board of directors. However, certain types of organisations and businesses are mandated or encouraged to have internal audit functions, and the Chartered IIA advocates for all public interest enterprises (PIEs) to have an internal audit function.

The audit plan is typically proposed by the CAE (sometimes with several options or alternatives) for the review and approval of the audit committee or the board of directors. Internal auditing activity is generally conducted as one or more discrete assignments. Internal audits play a critical role in a company’s operations and corporate governance, especially now that the Sarbanes-Oxley Act of 2002 holds managers legally responsible for the accuracy of their company’s financial statements. SOX also required that a company’s internal controls be documented and reviewed as part of its external audit. An independent external auditor performs audit activities to check compliance and financial reporting accuracy for statutory or public reporting purposes.

Building the Internal Audit Team

For example, a company purpose of internal audit may wish to have expanded its use of diverse suppliers; the internal auditor, independent of any purchasing process, will be tasked with analyzing how the company’s spending patterns have changed since this goal was set. Internal auditing strengthens the organization’s ability to create, protect, and sustain value by providing the board and management with independent, risk-based, and objective assurance, advice, insight, and foresight. Teams must ensure that they have the right technology tools to do their work.

Coordination of the Audit Work With Internal Auditors

Internal auditors will maintain the highest level of professional objectivity when gathering, evaluating, and communicating information about the activity or process under investigation. Internal auditors will form judgments based on a balanced assessment of all relevant circumstances and will not be unduly influenced by their own or others’ interests. Depending on the structure of the organization, the internal audit may be prepared by the board of directors of by upper management. With internal audits taking care of themselves, you can focus on other matters like boosting your business and bottom line. To understand how to conduct worry-free internal audits, book a demo with ZenGRC today. After a set amount of time, internal audit typically enacts next steps to make sure appropriate recommendations to the audit findings were enacted or remediated.

Nearly 50% of the Fortune 500 leverage AuditBoard to move their businesses forward with greater clarity and agility. But in case of an internal audit, the mistakes are spotted as soon as they are made, and corrected immediately. In a financial audit, the auditor will be able to determine if any mistakes were made in the financial records. And in case of special transactions like sale, purchase or revaluation of the asset, the authorization of this is also audited in an internal audit.

1. Internal auditors therefore do not audit organisations’ financial accounts, although they may audit any corporate governance or risk controls involved in the external audit process.
2. Internal auditing is also a good career path for individuals that are highly self-motivated, as even when auditors are on project teams they frequently do most of their work alone.
3. The functions of internal audit to educate management and employees on how to improve business operations and efficiency.
4. The chief audit executive (CAE) typically reports the most critical issues to the audit committee quarterly, along with management’s progress towards resolving them.
5. Understanding how each type benefits your business operations is helpful to appreciate an audit’s purpose and contribution to your company’s success.
6. These diverse responsibilities give internal auditors a broad perspective on the organization and make the internal audit function a valuable resource to boards of directors and senior management.

Internal Audit Function

The aim of internal audits is to identify weaknesses within the organization’s processes and control environment internally so that they can be fixed as quickly as possible to prevent harm to the organization or its stakeholders. Accordingly, the internal audit plan for an organization should be driven on a risk basis or, in other words, be designed to examine those areas that present the greatest risk to the company. The internal audit plan should also include a component of the strategic needs of an organization. Similarly, each internal audit purpose should be aligned with the audit plan. The end goal of either audit is an audit report; however, audit reports are used for very different reasons.