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Internal Audit, Corporate Governance & Risk Management

 

What is internal audit?

 

The role of internal audit is to provide independent assurance that an entities risk management, governance and internal control processes are operating effectively.

 

What is the value of internal audit?

 

Internal auditors deal with issues that are fundamentally important to the survival and prosperity of any entity. Unlike external auditors, we look beyond financial risks and statements to consider wider issues such as the entity's reputation, growth, its impact on the environment and the way it treats its employees.

 

Internal auditors help entities to succeed. We do this through a combination of assurance and consulting. The assurance part of our work involves telling managers and governors how well the systems and processes designed to keep the entity on track, are working. We offer consulting to help improve those systems and processes where necessary.

 

The difference between internal and external audit

 

While sharing some characteristics, internal and external audit have very different objectives.

 

These are explained in the table below:

 

 

       

External audit

 

Internal audit

 

Reports to

 

Shareholders or members who are outside

the organisations governance structure.

 

The board and senior management who are within the organisations governance structure.

 

Objectives

 

 

Add credibility and reliability to financial  reports from the organisation to its stakeholders by giving opinion on the report.

 

Evaluate and improve the effectiveness of governance, risk management and control processes.  This provides members of the boards and senior management with assurance that helps them fulfil their duties to the organisation and its stakeholders.

 

Coverage

 

Financial reports, financial reporting risks.

 

All categories of risk, their management, including reporting on them.

 

Responsibility  for improvement

 

None, however there is a duty to report problems.

 

Improvement is fundamental to the purpose of internal auditing. But it is done by advising, coaching and facilitating in order to not undermine the responsibility of management.

 

 

 

 

What internal auditors do

 

We have a professional duty to provide an unbiased and objective view. We must be independent from the operations we evaluate and report to the highest level in an entity: senior managers and governors. Typically this is the board of directors or the board of trustees, the accounting officer or the audit committee.

 

To be effective, the internal audit activity must have qualified, skilled and experienced people who can work in accordance with the Code of Ethics  and the International Standards.