Role Of Internal Audit On The Organization Outside The Finance Department

A company might decide to establish an internal audit department because an effective and independent internal audit department add values and improve effectiveness of risk management, control, and governance processes. It also helps prevent and detect the frauds.

The auditor’s responsibilities are to audit annual financial statements and internal controls over financial reporting, and reports from the 10-Q quarterly reports. The auditor must also advice on new accounting pronouncements, and consolidating financial statements. (Intel Proxy Statement 2011, 48)

Auditors usually use the internal control to assess the adequacy of the accounting system as a basis for preparing the accounts and consider factors that will affect the risk of misstatement. There are five components of internal control such as control environment, risk assessment, controlling activities, information and communication and monitoring

As part of this, external auditors often examine and evaluate internal controls used in managing the risks which could affect the financial accounts, to determine if they are working properly.

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.

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

(6) Auditors are independent parties who periodically examine a company's financial statements and the systems, internal controls and records used to produce the statements. Since a company's managers prodice their own report cards, i.e., the company's financial statements, auditors play an important role as a control mechanism. They attest that the financial statements conform to generally accepted accounting principles and they provide assurance that the company's accounts are presented fairly.

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

This survey was conducted of two groups: first group was represented by internal audit directors, and the second group was formed by staff auditors who work directly which external auditors. Both groups were asked to evaluate the overall performance of their organization’s external auditor and their perceived relationship with the external auditor. Next, we present the main results obtained through this survey: ♦ 92% from internal audit directors appreciated that external auditors make full use of the expertise of the internal audit staff; ♦ 50% of internal audit directors perceived that relationship between internal audit and external audit is an “excellent” one, while 31% appreciate this relationship as “good”; ♦ Staff auditors differed substantially in their perceptions of the external auditors’ of the internal auditor’s expertise. Only 39% of staff auditors considered that the external auditors fully utilized their expertise; ♦ Starting from the statement of Morris N. (Morris N., 1981) that “the external audit firm has the ear of the board of directors and, where one is established, the audit committee. Internal auditors do not have the same relationship”, Peacock E. and Pelfrey S. wanted to identify the relationship between internal audit and audit committee. From this point of view, more that 80% of the respondent directors of their study indicated that their companies have an audit committee, and that the internal audit

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.

All over the world there is a realization that the Internal Audit activity has the potential to provide hitherto unparalleled services to management in the conduct of their duties. This potential has been turned into a challenge and embodied in the new definition of Internal Auditing from the Institute of Internal Auditors (the IIA).

The internal auditing was important for each company management because it provides reporting for management and prevent the fraud inside the company. The internal auditors are the main reason that contributes to the success of the company. I will prepare the findings of both primary and secondary research. Thus, the discussion which including a detailed analysis of strengths and limitations of the project. After that, I will write the recommendations which resolve the problem of the company.

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.

Senior management wants internal audit to compensate for the loss of control they experience resulting from increased organizational complexity. Senior management expects internal audit to fulfill a supporting role in the monitoring and improvement of risk management and internal control, and wants them to monitor the corporate culture. Furthermore, they expect internal audit to be a training ground for future managers.

One such challenge facing internal auditors are the exaggerated got to read the business from the top-down. The recent headline frauds that initiated the SOX legislation have concerned major weaknesses within the tone at the highest and also the management setting. several audits of the past centered on transactions inside departments at numerous business units, whereas acts of fraud were being committed by executives at company headquarters. staring at the large image would require a rise within the varieties and extent of reviews at company offices, as well as not solely day to day transactions, however specific monthly, quarterly, and yearly processes which will have severe effects on the monetary statements.