Internal Audit

Class Synopsis on: Internal Audit Assurance: Knowledge Level Amin Siddiki FCA

The New Internal Audit Department

“We’re here to help!”

Teach + Train = Change

Promote effective, efficient and ethical practices and procedures

Definition: An appraisal or monitoring activity established within an entity as a service to the entity.

Function of Internal Audit:

Examining, Evaluating and Reportingtomanagement & the directorsonthe adequacy & effectiveness of components of the accounting & internal control systems.

•          Who ?

•          Employee of the entity or

•          Outsourcing

•          Why?

•          To assist management / board  in achieving corporate objectives

•          It is a recognised way of ensuring good corporate governance.

How to assist board / Management

•          Acting as auditors for board reports not audited by the external auditors.

•          Being the experts in fields (ie: implementation of new accounting & auditing standards)

•          Liaison with external auditor, Particularly where external auditor use internal audit work

Difference between Internal and External Audit

Denominator	Internal Audit	External Audit
Objective	It is an activity designed to add value and improve an organisation’s operation	To express an independent opinion on Financial Statements
Appointed by	Management	Shareholders
Responsible to	Management	Shareholders
Relating to	Whole operation of the organisation  both financial and non financial	Concern to the Financial Statement and related information
Who they are	Usually employee	Independent Firm

•          Activities of Internal Audit

•          Monitoring internal control

•          Examining financial & operating information

•          Review of the economy, efficiency and effectiveness of operations

•          Review of compliance with laws, regulations and other external requirements

•          Special investigations; ie: Suspected fraud

•          Internal audit to Risk Management

•       Internal Audit has a two folds role in relation to risk management

•       Monitoring the company’s overall risk management policy to ensure it operates effectively

•       Monitoring the strategies implemented to ensure that they continue to operate effectively

•          Internal audit to Internal Control

•          Key role of internal audit is to monitor the overall process and in providing assurance that the systems meet objectives and operative effectively.

•          Internal audit to operational Audit

•          Operational/Management/Efficiency audit is the operational processes of the organiasation. Their prime objective is the monitoring of management’s performance, ensuring company policy is adhered to.

•          There are two aspects of an operational assignment:

•          Ensure policies are adequate

•          Ensure policies work effectively

•          Ensure policy are adequate

•          Internal auditor will have to review whether the policies are adequate or not. If required advice to board to improve.

•          Ensure policies work effectively

•          The auditor will have to examine the effectiveness of the controls by testing.

Thank You