Welcome to 2014! Continuing where we left off in 2013, we will resume blogging about our range of business services that can add value to your organisation.
Back in 2011 we wrote a blog article titled ‘What is Auditing? which explained the types of auditing and briefly touched on some of the benefits of internal auditing.
In today’s blog article we will look at internal auditing in more detail, describe its focus and highlight the advantages of outsourcing.
An overview of internal auditing
Internal Auditing is an assurance and consulting process that should add value to an organisation’s operations. It relies heavily on objectivity and requires internal auditors to be independent from the organisation’s activities.
The role of the internal auditor
The internal auditor is usually an employee of the organisation and a person who the organisation can rely on to give a constructive and objective view of core areas including risk management, corporate governance and internal control.
- Risk Management
An internal auditor will pay attention to a company’s risk management activities in order to identify how effectively it is anticipating and dealing with potential risk factors that will affect the company’s ability to achieve its mission and objectives.
- Corporate Governance
The internal auditor is often considered to be one of the ‘four pillars’ of corporate governance. Their role includes helping the Audit Committee to perform its functions effectively, which involves everything from reporting critical management control issues to identifying areas of board oversight.
- Internal control
Internal control is squarely management’s responsibility and is made up of 5 critical components i.e. the control environment, risk focused control activities, risk assessment, information and communication, and monitoring activities. It is the internal auditor’s responsibility to undertake audits to review these 5 components, ensuring that these components are present and operating in an effective manner.
By carrying out an analysis on these three core areas, a report is created at the end of the audit to feedback to management or the board of directors, the findings and recommendations including:
- Problem areas that were identified including benchmarks or corporate policies that failed to be met
- Reasons why the problem occurred and the effect caused / opportunity cost
- Steps to rectify the issue
Outsourcing your internal auditing
The truth is that any company can benefit from an internal auditing process but many often cannot afford to employ a full-time auditor or fail to see the value in it. By outsourcing your internal auditing, you can easily experience the value this process brings in a way that suits your budget. You also ensure that you are receiving completely independent and objective advice as the internal auditor is in no way affiliated with your business.
To find out more about how an internal audit can help you company, call Brett on 021 421 4444.