The internal auditing profession is an independent appraisal function established within an organization to examine and evaluate the adequacy and effectiveness of the organization’s internal control system and its overall quality of performance. It includes monitoring, assessing and analyzing organizational risks and controls and making sure that the organization is compliant with policies procedures and laws. It also includes reporting to top management with analysis, appraisal, and recommendations for enhancing processes, policies and procedures. Internal auditing is very important in large organizations, and could be a part of the success or failure of the organization.
Internal Auditors must have the courage and conviction to confront sensitive issues, must model uncompromising integrity and ethics, and must be relentless in their commitment to get to the bottom of things.
It should be well understood that Internal Auditors are different than External Auditors.
This below table shows the key factors that distinguishes and differentiates between them:
IN REGARDS TO:
INTERNAL AUDITING:
EXTERNAL AUDITING:
1- Focus
Provides financial-, operational-, assurance-, consultative-, governance-, computer-, and fraud- related services.
Primarily attests to financial statements and internal control.
2- Management
Reports to executive management administratively. Builds relationships throughout the organization to ensure concerns are identified and resolved in a timely manner.
Primarily reports to the audit committee on financials and internal control.
3- Audit Committee
Reports directly to the audit committee. Provides opinions on the organization’s business risks, financial statements, system of internal control, and level of compliance with laws, regulations and policies.
Attests to the audit committee the accuracy of the financial reports and attests to management’s assessment of internal controls over financial reporting. Provides updates on pending accounting pronouncements and their potential impact on the organization.
4- Standards
Follows the IIA’s Internal Standards for Professional Practice of Internal Auditing.
Is governed by the PCAOB’s Auditing Standards.
5- Approach
Customizes approaches to best meet individual assignment objectives.
Generally follows an approach based on prior work.
6- Independence
Demonstrates organizational independence and objectivity in work approach, but is not independent of the organization. (Is independent of the activity audited, but is integral to the organization).
Is independent of the organization.
This Information was published by the IIA TONE at the TOP, Issue 25-March2005
