 INTERNAL AUDIT

WHAT IS INTERNAL AUDIT?

 "Internal audit is a dynamic profession involved in helping organizations achieve their

objectives. It is concerned with evaluating and improving the effectiveness of risk
management, control and governance processes in an organization.

To do this, internal auditors work with management to systematically review systems and
operations. These reviews (audits) are aimed at identifying how well risks are managed including
whether the right processes are in place, and whether agreed procedures are being adhered to.
Audits can also identify areas where efficiencies or innovations might be made. Internal audits are
organized under an ongoing program of review and advisory activity this is based on the strategic
needs of an organization.

In the course of their role, internal auditors work across all areas of an organization. In addition to
core areas of financial control and IT, they review the tangible aspects of operations, such as an
organization’s supply chain or IT systems; as well as more intangible aspects such as
organizational culture and ethics. In fact, any system that has an impact on the effective
operation of an organization may be included in internal audit’s scope.

Internal audit reports are presented to the CEO and board (via the audit committee) as they
provide an independent viewpoint on the extent to which an organization is poised for success and
advice on areas for improvement.

Internal auditors work in all sectors (public, private and not-for-profit) and may work as an
employee of the organization, or through an external service provider.

DEFINITION OF INTERNAL AUDITING

 "Internal auditing is an independent, objective assurance and consulting activity
designed to add value and improve an organization’s operations. It helps an
organization accomplish its objectives by bringing a systematic, disciplined approach
to evaluate and improve the effectiveness of risk management, control and
governance processes."
 NEED AN INTERNAL AUDITOR
 Internal Auditing is a specialist profession that requires certain competencies and
attributes.

Many people make the mistake that an Accountant is an Internal Auditor. Whilst many
Accountants do become Internal Auditors, it is not true to say that any Accountant is competent
to perform internal audit work.

This takes specialized training over many years and in fact Internal Auditors can come from
almost any discipline including areas such as engineering, healthcare and ICT.

Many people also make the mistake of assuming ISO–related auditing such as the auditing of
Quality Management Systems is the same as internal auditing conducted in corporate and public
sector organizations.

Internal audit is a key pillar of good governance. It provides the Board of Directors, the Audit
Committee, the Chief Executive Officer, Senior Executives and stakeholders with an independent
view on whether the organization has an appropriate risk and control environment, whilst also
acting as a catalyst for a strong risk and compliance culture within an organization.

 ROLE OF INTERNAL AUDIT

Consistent with its mission, the Internal Audit Department provides management with information,
appraisals, recommendations, and counsel regarding the activities examined and other significant issues.

The department executes an approved audit plan and will perform the following tasks in accordance with its
overall strategy:

 Verify the existence of assets and recommend proper safeguards for their protection;
 Evaluate the adequacy of the system of internal controls;
 Recommend improvements in controls;
 Assess compliance with policies and procedures and sound business practices;
 Assess compliance with state and federal laws and contractual obligations.
 Review operations/programs to ascertain whether results are consistent with established objectives and
whether the operations/programs are being carried out as planned;
 Investigate reported occurrences of fraud, embezzlement, theft, waste, etc.

Roles and Responsibilities of an Internal Auditor

It helps an organization accomplish its objectives by bringing a systematic, disciplined approach
to evaluate and improve the effectiveness of risk management, control, and governance
processes." In simplest terms, the duties of an internal auditor are to: Objectively review an
organization's business processes.

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 Internal Audits Important
Organizations establish an independent internal audit function to provide continuous review of
the effectiveness of risk management, control, and governance processes. Internal audit does
this by: Providing independent, unbiased assessment of the operations of the organization.

Objectives of the Internal Audit

The recommendations in an internal audit report are designed to help the
organization achieve effective and efficient governance, risk and control processes associated
with operations objectives, financial and management reporting objectives; and
legal/regulatory compliance objectives.

 Benefits of internal Audit

Some of the benefits of having a good system of internal controls are:
 Helping protect assets and reduce the possibility of fraud.
 Improving efficiency in operations.
 Increasing financial reliability and integrity.
 Ensuring compliance with laws and statutory regulations.
 Establishing monitoring procedures.

Purpose of an internal Audit

Internal audit is to provide independent assurance that an organization’s risk management,
governance and internal control processes are operating effectively.

 Types of audit
There are a number of types of audits that can be conducted, including the
following:
 Compliance audit.
 Construction audit.
 Financial audit.
 Information systems audit.
 Investigative audit.
 Operational audit.
 Tax audit.

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  Steps to conduct an internal Audit

1. Step #1: Know what and when to audit. Before conducting the internal audit, you
should identify what processes are going to be audited. ...
2. Step #2: Create an audit schedule. ...
3. Step #3: Pre-Planning the scheduled Audit. ...
4. Step #4: Conducting the audit. ...
5. Step #5: Record the findings. ...
6. Step #6: Report findings.

 Value to the organization

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

 Assessing the management of risk:

The profession of internal audit is fundamentally concerned with evaluating an
organization’s management of risk. All organizations face risks. For example, risks to the
organization’s reputation if it treats customers incorrectly, health and safety risks, risks of
supplier failure, risks associated with market failure, cyber security and financial risks to
name some key areas. The key to an organization’s success is to manage those risks
effectively – more effectively than competitors and as effectively as stakeholders demand.

 Assisting management in the improvement of internal

controls:
An internal auditor’s knowledge of the management of risk also enables him or her to act as
a consultant providing advice and acting as a catalyst for improvement in an organization’s
practices.
So, for example if a line manager is concerned about a particular area of responsibility,
working with the internal auditor could help to identify improvements. Or perhaps a major new
project is being undertaken – the internal auditor can help to ensure that project risks are
clearly identified and assessed with action taken to manage them.

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 Strategic Management

 Assignment On; Internal Audit

 Submitted To; M Mariam

 Submitted By; Umar Farooq

 Roll No; (61)

 BBA; (Vii) Evening

Government College of Management Sciences Abbottabad

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 General Knowledge Topic

 Assignment On; Olympic Games

 Submitted To; Sir Zee Shan H

 Submitted By; Umar Farooq

 Roll No; (61)

 BBA; (Vii) Evening

Government College of Management Sciences Abbottabad

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 Wages, Salary, Administration

 Assignment On; Info Technology

& Employee Benefits Employee &
Assistance Program Counseling
Services or Child and Elder Care

 Submitted To; Sir Qasim

 Submitted By; Umar Farooq

 Roll No; (61)

 BBA; (Vii) Evening

Government College of Management Sciences Abbottabad

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