Op-Ed: What to know about internal auditing

By Anishka Collie

An Internal Audit Department (IAD) can be established to examine and evaluate, in an independent manner, your entity’s business systems and processes, controls and risk management; and to provide recommendations for improvement, thus providing assurance and assistance to management and staff in the effective discharge of their responsibilities and the achievement of your entity’s goals.

As defined by the Institute of Internal Auditors (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.

Whether your entity’s goal is to offer supreme services or products that meet customers’ needs, or to be a responsible corporate citizen, the IAD exists to help your entity achieve its goals and business objectives in an ethical, legal and well-governed manner.

Independence

Independence is the freedom from conditions that threaten the ability of the IAD to carry out internal audit responsibilities in an unbiased manner.

To provide independence, the reporting relationships, authority, objectives and responsibility of the IAD are established by the Audit Committee on behalf of the board of directors. The internal auditor is to report to the chief executive officer, or equivalent, for administrative purposes and has full and independent access to the Audit Committee.

Authority

1. The IAD is established to perform internal audit and review (investigation and inspection) engagements, as such all systems, processes, operations, functions and activities within your entity are subject to an internal audit evaluation.
2. The IAD must have unrestricted access to all information, documents, property and personnel. Where unrestricted access is not given, this impacts the engagement scope and effectiveness. This scope limitation should be reported to the CEO and the Audit Committee.
3. The board and the CEO are to recognize the importance of an impartial and objective assessment of management’s performance and fully support the IAD as an independent appraisal function, which examines and evaluates your entity’s activities as a service to the board and management.
4. The internal auditor is part of, and cooperates with, the management team in a joint effort to ensure success of your entity in achieving its goals.
5. The internal auditor has the authority to initiate, carry out and report on any action considered necessary to fulfill the IAD’s goal.
6. The internal auditor and staff of the IAD are not authorized to:
   • Perform any operational duties for your entity or its affiliates;
   • Initiate or approve accounting transactions external to the Internal Audit Department;
   • Direct the activities of any organization employee not employed by the Internal Audit Department; or
   • Perform an internal audit of an operational department where he/she previously worked for at least one year.

Anishka Collie is CEO and principal consultant at ATC Financial Advisors and Consultants, website www.atcadvisors.com. Collie can be contacted at (242) 376-0411.