Internal audit -
“Internal audit is an independent management function, which involves a continuous and critical appraisal of the functioning of an entity with a view to suggest improvements thereto and add value to and strengthen the overall governance mechanism of the entity, including the entity’s strategic risk management and internal control system. Internal audit, therefore, provides assurance that there is transparency in reporting, as a part of good governance.”
- The Internal Audit Standards Board of the ICAI.
Evolution of Internal Audit-
As a Sibling of External AuditAs a Cross Check
As a Probity Police
As a Non Financial Systems Police
Factors to Evolution-
Increased size and complexity of businessesEnhanced compliance requirements
Focus on risk management and internal controls to manage them
Unconventional business modelsIntensive use of Information Technology
Stringent norms mandated by regulators to protect investors
An increasingly competitive environment
Need for internal audit to provide demonstrable value addition
The Value of Internal Audit in Audit Committees -
“An active and informed audit committee provides the ultimate independent and objective oversight of the corporate control environment, including focus on emerging trends and risks. Internal auditing is the primary agent of the audit committee within the company.’’
-Ford Motor Company
Conclusion -
With this trend going on, it is observed that the internal audit has carved itself out as a distinct professional service and, in some respects, an unique profession altogether.
