Internal auditors are responsible to

The Institute of Internal Auditors (IIA) defines Internal Auditing as:

“An independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The internal audit activity 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.”

Consistent with its mission, the Internal Audit Department provides management with information, appraisals, recommendations, and counsel regarding the activities examined and other significant issues.

The department executes an approved audit plan and will perform the following tasks in accordance with its overall strategy:

• Verify the existence of assets and recommend proper safeguards for their protection;
• Evaluate the adequacy of the system of internal controls;
• Recommend improvements in controls;
• Assess compliance with policies and procedures and sound business practices;
• Assess compliance with state and federal laws and contractual obligations.
• Review operations/programs to ascertain whether results are consistent with established objectives and whether the operations/programs are being carried out as planned;
• Investigate reported occurrences of fraud, embezzlement, theft, waste, etc.

Independence is essential to the effectiveness of the internal audit function. In carrying out the duties and responsibilities, the Director of Internal Audit will issue reports to the Vice President and General Counsel in charge of the internal audit function, Senior Vice President, and the Vice President concerned. The Director of Internal Audit will meet with the Finance and Audit Committee of the Board of Trustees periodically to report the plans for audit activity, the results of audit activity, and to provide any other information required. The Director of Internal Audit has direct access to the President and the Board should matters of immediate significance arise which demand such attention.

Certified Internal Auditor

Are you curious about becoming a Certified Internal Auditor (CIA)? This article will explain the roles and responsibilities of this position, detail how you can earn your certification, and how you can use this designation in your career.

As a CIA, your role is to independently and objectively evaluate the operations within an organization. The role can vary depending on the industry or company needs, but in general, the auditor is tasked with maintaining relevant information flow between the company’s board of directors and/or senior management and making sure that operations and business processes are in compliance with company policy and legal regulations.

The biggest difference between an internal and external auditor is the type of information you are managing. As an internal auditor, you’re tasked with the holistic management of information, which is primarily non-financial information. As a hired external auditor, your job is to examine the financial condition or business dealings, as well as compliance with different laws within the industry. As an internal auditor, understanding the functionality of each kind of external auditor helps one better prepare for the documentation and requirements when an audit is required.

Who is an ideal candidate for the CIA?

Anyone who envisions a career in internal auditing is the perfect candidate for the CIA Certification. Being a CIA will offer auditors more opportunities for advancement as well as a higher salary. Students are excellent candidates for the CIA Exams:

1. It is more affordable to take the exams with student discounts.
2. Students usually have more free time than working professionals and/or individuals who have families.
3. Students are already entrenched in and accustomed to the study process.

What is an Internal Audit?

An internal audit is a managerial tool that serves to improve processes and internal controls within a company. It consists of a department within a company that is mandated to provide an assessment of the organization’s risks, control environment, and operational effectiveness. The department reports to the board and senior management, which are within the organization’s governance structure.

What do Internal Auditors Do?

As an internal auditor, your role includes providing an in-depth dive into the company’s business dealings and processes and then analyzes and converts the information into meaningful and insightful data to improve operations. To do this, the auditor uses techniques such as:

1. Consistently reviewing company business practices.
2. Evaluating that risk management procedures are in place.
3. Implementing controls to protect against fraud and theft of the organizational assets and money.
4. Ensuring laws and regulations are compliant.
5. Making recommendations on process improvement.

Responsibilities of Internal Auditors

Ensuring the success of an organization and bridging the gap between the board of directors and the corporate management team is a key performance indicator. Below are some of their specific responsibilities and duties:

1. Evaluating risk management activities within the organization.
2. Determining the organization’s compliance with relevant laws and regulations.
3. Evaluating and making recommendations that can assist in improving internal control.
4. Investigating fraud via a fraud risk assessment that uses fraud deterrence principles.
5. Offering an objective source of independent advice to help reach the goal and achieve legality and validity.
6. Performing audit assignments assigned to them
7. Learning and studying the organization’s policy and guidelines.
8. Identifying audit scope and developing annual plans within the organization.
9. Gathering, analyzing, evaluating, and presenting accounting documentation, reports, data, and flowcharts.
10. Following up the audits to monitor the managements’ intervention.
11. Promoting ethics and identifying improper conduct within the company.

Qualities of a professional Internal Auditor

You must be objective, independent, and impartial when carrying out internal audits. Below are some of the qualities a professional internal auditor should possess.

• Integrity – High ethical work standards.
• Independence – Ability to work alone because auditors may travel far away from their team.
• Good communication skills – Ability to explain their findings and insights.
• Diversity – Ability to change with current trends and affairs.
• Persuasiveness – Ability to effectively communicate the necessary course of action.
• Assertiveness – Be confident during the audit process and take control of the agenda.
• Reliability – They must be ready to be available for all critical audit processes by investing their time and energy.
• Punctuality – The auditors need to hand in reports on time, and since a team is involved, a good auditor should be punctual in all meetings.

Becoming a Certified Internal Auditor (CIA)

The Institute of Internal Auditors (IIA) awards the CIA certification. Becoming a CIA requires a University degree, two years of work experience, and passing a three-part exam. (There are some exceptions to education and work experience requirements.)

A CIA enjoys the following benefits and opportunities:

• Being part of a global organization for the Internal Auditor Profession, The Institute of Internal Auditors (IIA).
• Gaining respect and credibility for top positions worldwide.
• Lucrative salary.
• Greater career opportunities.

Internal audits play a significant role in the company’s growth by ensuring that the company is moving in the right direction.  As an aspiring CIA, you must possess qualities such as integrity, assertiveness, excellent communication, teamwork, and independence.

Do you think the role of Internal Auditor could be right for you? Learn more about how HOCK international can help you advance your career and succeed in achieving this prestigious credential.

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This information sheet (INFO 221) provides guidance to assist organisations that are considering whether to have an internal audit function, and to ensure the quality of this function. It may be relevant to directors and audit committees of entities subject to the ASX principles.

This information sheet explains:

What is internal audit?

An internal audit function can contribute to corporate governance by providing an organisation's directors and audit committee with independent reviews of, and suggestions for, improving the design and operation of the organisation’s:

• financial and non-financial control environment
• processes for identifying and monitoring risks
• governance processes.

Internal audit can be an important element in the control environment of organisations and can contribute to more effective risk management.

What do the ASX Corporate Governance Principles say about having an internal audit function?

The ASX Corporate Governance Principles and Recommendations (PDF 2.2MB) state that if a listed entity does not have an internal audit function, they need to explain the reason for this. Additionally, they should explain how risk management and internal control processes are managed, evaluated and continually improved in the absence of an internal audit function.

How can internal audit be independent?

In order to ensure the independence of the internal audit function from management:

• the internal audit function should report directly to the audit committee, rather than the management of the organisation
• the internal audit charter and plan should be reviewed and approved by the audit committee, who should also receive and review reports on internal audit engagements, and monitor the performance and independence of the internal audit function
• while the internal audit budget may be set with the chief executive officer, the appropriateness of the budget should be reviewed by the audit committee.

Internal audit services may be provided by employees, external service providers or a combination of the two. However, the external auditor should generally not also provide internal audit services to the same organisation.

How is the quality of internal audit work assured?

Internal audit should maintain a quality assurance and improvement program, including workpaper reviews and performance evaluations. Periodic external reviews of internal audit may also be appropriate.

Where can I get more information?

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.

This is Information Sheet 221 (INFO 221), issued on 20 June 2017. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.