Internal audit is and self-governing assessment function established by the management of an organisation for the review of the internal control system as a service to the organisation. It separately examines, evaluates and reports on the sufficiency of internal control as a involvement to the correct, economic and successful use of resources
Scope of Internal Auditing
The possibility of internal auditing currently embraces wider concepts of community governance: risk and power – recognizing that organize exists within an organization basically to manage risk and advance valuable governance . The most significant vary is that the internal auditors are estimated to modify their mindset: from faultfinders to advisers. Internal auditors should take care of the
auditee as their consumer. As with a client, the internal auditor should obviously communicate with the auditee, engage management in the audit development process, consider organizational risks that are prospective areas of audit anxiety, work with managers to find suitable solutions, discuss conclusion before officially reporting, and seek suggestions from the auditee for the development of audit practice. Some organizations with broad-scope internal auditing is in progress using internal audit as a exercise ground for their prospective managers, as it provides a bird’s eye too analysis of the entire organization. Internal auditing has become a profession in its own right, with a body of comprehension, professional qualifications, code of ethics, self-sufficient career progression and a system of quality secure.
Much of the development in internal auditing has taken place in the private sector. However, the public sector has also started realizing the importance of this function. The public sector has seen several waves of thought. Soon after the World War II, the rebuilding of war torn economies and developing the de-colonized countries became the most important priority. Everyone was enthusiastic about planning, import substitution and fixed exchange rate. The theory worked well for a few years when it started showing constraints. The challenge of socialism and the cold war concerns gave birth to large-scale nationalizations around the globe. The size of Government started bulging. The public sector became quite large. This gave birth to the realization that the public sector must perform in an environment of economy, efficiency and effectiveness. Demands for performance measurement, and value-for-money became prominent. While there was a level of dissatisfaction with the frameworks for performance measurement and value for money auditing that governments had in place, these concerns about the efficiency and effectiveness of the public sector remained vexing and generally were not addressed in any substantive way until a wave of privatization engulfed the entire world. The privatization led to demands for proper regulation of the newly emerging privatized enterprises. Along with this came a whole host of concerns for good governance, transparency and accountability of the public sector from a much broader and more influential range of stakeholders.
Objectivity of the Internal Auditor
Each internal auditor should have and purpose manner of mind and be in a sufficiently autonomous position to be able to implement judgement, express opinions and present recommendations with impartiality.
- The internal auditor, although his employment by the organisation, should be free from any difference of attention arising either from professional or personal relationships or from pecuniary or other interests in an organisation or activity which is subject to audit.
- The internal auditor should be free from undue influences which either restrict or modify the scope or conduct of his work or over-rule or significantly affect judgement as to the content of the internal audit report.
- The internal auditor should not allow his objectivity to be impaired when auditing an activity for which he has had authority or responsibility.
- An internal auditor should be consulted about significant proposed changes in the internal control system and the implementation of new systems and make recommendations on the standards of control to be applied. This need not prejudice the auditor’s objectivity in reviewing those systems subsequently.
- An internal auditor should not normally undertake non-audit duties but where he does so, exceptionally, he should ensure that management understands that he is not then functioning as an internal auditor.