The fundamental role of internal audit is to assist management to attain organization’s goals. It also provides assurance that the management has implemented a satisfactory internal control system for risk prevention. In accumulating, internal audit provide internal consulting services to the whole organization in terms of facilitation,
advices, training and counsels.
According to IIA “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”
According to the IIA definition, internal auditing can well be classified into three diverse areas;risk management, corporate governance and internal control. Internal auditors play a basic role not only in risk management but also providing consultants and assurance services to the executives
Internal audit plays a role of risk management mechanism in organizations. Internal audit play a critical role in monitoring the risk profile of an organization.
Internal audit also plays a vital role in internal control mechanism in organizations. The directors and management of an organization adopt internal control process, which provides assurance about the attainment of the organization’s objectives regarding operations, financial reporting and compliance with the regulations
(COSO Report, 1992).
This is in accordance with the IIA view about internal auditing; which helps organizations to improve and evaluate governance processes . Thus, positive relation between the internal audit function and a stronger audit committee can be expected because of their closely intertwined goals.
On the basis of economic theory most of the organizations are looking towards achieve their goals i.e. profit (maximization), but this view is not accepted in today’s business world. Further, Kotler describes that the common objectives of most of the companies are; to increase sale growth, profitability, innovation and diversification of risks.
Internal Audit in fact is an activity which is designed to add value and improve company’s operations. It ensures reliability and integrity of financial and other operating information and the means used to identify measure, classify and report such information. It helping an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and
governance processes. Internal audit assists the management of an organization by giving valuable recommendations on weak areas in order to enhance overall effectiveness and efficiency of company’s
operations. Internal auditors generally know where the control weaknesses are and which individuals or operations bear closer scrutiny.
An organization compliance with the internal auditing standards not only makes an effective internal control system but also lead the organization to achieve its ultimate objectives. An internal audit basic activity is to review and evaluate the internal control system and the quality of performance carries for assigning responsibilities. It also review effectiveness of the internal control system is to find out whether the internal control system is functioning well as it is intended to do or not. The system is called to be effective, if the system provides reasonable assurance that the organization’s goals and objectives will be achieved. Internal auditing plays their role in risk management, corporate governance and internal control not only but also providing consultancy and insurance services to the executives.
courtesy:Shah Saud ,Karlstad Business School, Karlstad Uiversity, SE-651 88 Karlstad, SWEDEN