WHAT IS INTERNAL AUDIT?

Internal auditors look at how organisations are managing their risks. They provide the audit committee and the board of directors with information about whether risks have been identified, and how well they are being managed.

Among other things they check that operations are conducted effectively, efficiently and economically in accordance with the organisation’s policies; that laws, regulations, policies and procedures are complied with; that the assets of the organisation are being safeguarded; that records and reports are relevant, reliable and accurate. Internal auditors also review systems under development to ensure that good controls are built in. They may carry out consultancy services or special reviews at the request of management.

Their function is different to that of external auditors because it does not focus only on financial risks: much of the work looks at reputational, operational or strategic risks.  Internal auditors give an independent opinion on whether internal controls put in place to manage these risks – such as policies and procedures – are actually working efficiently as intended.

The official IIA definition of internal auditing: Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

The responsibility to manage risk always resides with the governing body and, through them, Management. Internal audit’s role is to identify potential problem areas and recommend ways of improving risk management and internal control.

Internal audit may be provided by in-house staff, or an outsourced team.  Either way, it is independent of the Management structure. The function reports directly to the audit committee. This independence gives it a unique and valuable perspective on risk management and internal control processes. 

The Institute of Internal Auditors – UK and Ireland (IIA) is the recognised authority on internal auditing. The institute promotes best practice throughout the profession and develops the profession for the benefit of members and their organisations.

A professional, well resourced internal audit function is an integral and necessary part of an effective corporate governance framework. Alongside the Board, external audit, and executive Management, internal audit is one of the cornerstones of good governance.