Managing An Internal Audit Department

This means that the main goals of the act in enhancing auditor independence in preventing fraud in future are faced with pressures regarding its efficiency. Case 3 Effective fraud control depends on prevention of the following three weaknesses in the internal control system. First is the static nature of internal controls. This means that internal controls might not be fluid in terms of evolution with the changes experienced in technology, business and the fraud environment. Second is the immunity of the internal control systems. For instance, if a company’s internal control system has weak control policies for its procedures and processes, then the company becomes a target for both internal and external criminal activities. Thirdly, are unclear definitions of the roles and responsibilities of ownership. By this it means that if the internal control system is not well defined to the employees, then there will be an assumption that the role of the internal controls is to only perform audits hence they would not be interested in preventing fraudulent

When auditing a public company, the auditor must form an opinion on the effectiveness of internal control

The purpose of this research is to provide a summary outline on internal auditing by uncovering motives behind corporate fraud, executives greed for power, money and influence. These issues will include a transitory story of the Archer Daniels Midland Company (ADM) scandal which results in fraudulent corporate practices using the fixed pricing scheme. If internal auditing practices were implemented at ADM may have saved investors and customers millions of dollars. This topic shifts to company responsibilities for employing internal auditing practices and managers’ duties to uphold integrity over a decade Sarbanes-Oxley Act of 2002 has been prescribed. This paper ties in the connection between internal auditing and management by flowing into managerial accounting processes.

The company should hire it’s own internal auditor’s to ensure that the staff understand the company’s accounting procedures. This also helps the external auditor as it give the external auditor another viewpoint when assessing fraud risks. The internal auditors are apart of those charged with governance and that helps take the pressure off of the external auditor if a fraud should be discovered.

Director of Internal Audits: The Director of Internal Audits argued that the new IA function should focus more on operational auditing issues, but it also should play a role in the review of internal controls over financial report.

The employees applied internal auditing in their work in Deloitte & Touche company. In my opinion, each employee should have experience and knowledge

In 1941, The Institute of Internal Auditors (IIA) was founded to provide guidance to internal auditors (Whittington & Pany, 2014). “With over 170,000” international members, “the IIA has paralleled the recognition of internal auditing as an essential control function in all types of” businesses (Whittington & Pany, 2014, p. 778). In the United States, nearly every large corporation maintains a staff of internal auditors (usually employees and not independent contractors) to identify theft, waste, and fraud (O’Donnell, 2015; Whittington & Pany, 2014). Besides examining the financial statements, internal auditors also analyze the internal control of organizations (O’Donnell, 2015). That is, they are responsible for enhancing a company’s operations. For instance, internal auditors may evaluate the risk to a corporation’s reputation if they use low-wage workers in third-world countries (O’Donnell, 2015). In addition, they may investigate why products are getting overproduced compared to the available resources or inspect the quality of the finished

Companies frequently conduct internal audits of their business operations. Internal audits are conducted in a professional manner, designed to provide company management with an unbiased and objective view of how the company is operating. Often times the process is conducted by an outside agency, or a privately hired internal auditor.

Internal auditing is an independent objective assurance and consulting acitivity designed to add value and improve an organizations operations.

Internal auditors cannot effectively provide an analysis on the company’s internal dealings as they are part of the company. External auditors, however, can observe these processes from the outside and then determine where the funds of the company and whether the dealings adhere to the regulations. Using external auditors in a company prevents conflict of interest from happening. Conflict of interest is a situation where an individual or organization has multiple interests and of those multiple interests, one could possible corrupt the motivation for an act on the other when the auditor has any kind of beneficial interest in their client’s performance. In other circumstances, there is also the threat of familiarity where auditors become

According to the Institute of Internal Auditors (IIA), (2011), the internal auditing is a team of consultants, a department and a division or other practitioner which independent, have objective assurance and conduct a consulting activity which is designed to add value and improve the organization operations. The internal auditor can help an organization in achieving its objectives by bringing a discipline and systematic approach in order to improve and evaluate the effectiveness of risk management, control and governance process.

Once again the profession of internal auditing received an impetus as SOX guarantees to mandate several changes in business and also the observe of internal auditing. The SOX legislation has been designed to forestall and establish several of the recent frauds effecting organizations and their investors. As a result, the audit profession can all over again gain numbers, but this point the role and methodology of the interior audit perform can modification to satisfy needs of the new legal mandates. Internal auditing can have got to take a “Big Picture” read and audit from the highest down.

| Internal audit may not be privy to allsources of information throughout thecompany if seen as “outside” themanagement structure.The chairman of the audit committee maynot have allocated sufficient time, or haveadequate resources/capacity to deal withthe oversight of the internal auditfunction.It would be necessary to set up aspecific charter outlining the roles andresponsibilities of the board in relationto internal audit, as separate frommanagement. For example, who wouldlook after the HR administration, includingpersonnel evaluations, compensation andcareer planning for the head of internalaudit?The audit committee would be assumingmore responsibility and therefore,perhaps, more liability in relation to theadequacy of the internal control and risksystems of the organisation.Potentially restricts the ability of the CEOto use internal audit as a tool to reinforcecontrol principles, or in special projects.

“An unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made.”

The role of internal audit is to provide independent declaration that an organization’s threatadministration, governance and internal control processes are functioning effectively. Internal auditors deal with concerns that are essentially important to the existence and success of any organization. Unlike external auditors, they aspect beyond financial possibilities and statements to reflect wider problems such as the organization’s reputation, development, its power on the location and the approach it treats its organizations.In summary, internal accountantssupport organizations to thrive.