Internal auditing denotes an independent service and objective assurance task intended to assess a corporation’s internal control, processes, techniques and corporate practices to add value and enhance an organization’s operations. Accordingly, internal audit benefits in securing compliance with diverse laws applicable to the company. Internal audit is built upon three solid elements; assurance, insight and objectivity.
The Responsibilities of an Internal Auditor
Evaluate risks; risks exist in every firm hence the need for internal auditors to assess the effectiveness, degree and significance of various systematic (market) risk and unsystematic (specific) risk and derive an effectual management risk strategy. Unsystematic risks include new competitor with potency to gain significant market share, supplier loss, product recall, reputation damage, ineffective operations and change in regulations which can downsize the firm’s sales. Systematic risks entail recession, natural disasters, interest rate changes and inflation.
Assess processes and procedures; internal auditors explicitly reviews operations and examines whether current processes are strategically designed to aid the company in achieving prime goals and objectives.
Evaluate controls; internal auditors assess a firm’s efficacy and assurers the management adequate controls on apparent risks that are a threat to the company.
Ensures accuracy; internal auditors verify the firm’s financial statements’ correctness. Thus, they analyze operational and financial information’s integrity, constancy and reliability.
Enhances operations; with rational and reflective organizational goals and objectives’ comprehension, internal auditors scrutinize operations to determine their effectiveness and efficiency.
Monitor compliance; internal auditors evaluate the corporation’s compliance with contracts, regulation and relevant laws to ensure adequate compliance. They further offer insight on demerits of noncompliance.
Assure safeguards and investigate fraud; a firm’s tangible and intellectual property, and human capital and resources are valuable thus the need to guard them against possible damage. Internal auditors examine the techniques and procedures used in protecting assets from losses like fire, illegal activities, theft and natural hazards and offer enhanced protection recommendations. Besides, they conduct audit and investigate probable fraudulent actions in the firm.
Offer advice and insight; an internal auditor’s advice is vital when handling certain projects like new technology execution, partnerships and mergers and acquisitions. Internal auditors will offer acumen on financial and strategic risks which is integral to a company’s operation.
Challenges of an Internal Auditor
Limited time; compiling audit reports on time requires extra efforts and sometime working beyond the contracted timeline. Generating standardized reports that comply with rules and regulation is tedious and time consuming.
Lack of support from the management; company managers and directors may ignore internal auditor’s advice and insight which may lead to conflicts of interest and sabotages audit process thus hampering the firm’s overall operational and financial efficacy.
Inadequate professional auditors; finding experts and competent auditors with right attitude is a hurdle. When found, retaining them is difficult due to heightened demand and are always pulled to greener pastures.
Constant evolution in technology; auditing practice requiresknowledge of the latest technology tools hence constant training and research on modern digitalization is crucial to meet ever demanding audit market share.
Necessary Skills for Internal Auditors
Accounting skills; to verify financial statements’ accurateness, find errors and offer solution
Critical thinking; to strategically analyze internal controls, processes, procedures and issues and offer feasible illumination.
Excellent communication; to attentively listen to issues, speak effectually and write unmistakably.
Risk management; to identify possible risk and devise mitigation plans.
Problem-solving; to alleviate complex operational and financial hurdles by integrating different principles on risk management, technology, and operations.
Regulatory knowledge; to ensure compliance with local and international standards.
Data analytics; to creatively analyze issues and enhance audit efficiency
Leadership skills; to be able to lead a professional team as one moves up the rank.
In a nutshell, internal auditing entails identifying the risks that could deter a firm from attaining its goals and objectives, ensuring that the corporation’s management are aware of the risks, and ardently recommending enhancements to help decrease the risks. For effective internal, the firm’s management must openly deliberate on tough issues and make obligatory changes for augmentation. Certainly, internal auditors must have an independent reporting line to the uppermost governing body for instance, the board of directors’ audit committee. The firm should ensure internal auditors have requisite authority to access all the company operational areas and know that the team will receive adequate supported if and when their assessments, observations and views differ with those from the management.
By Nancy Busera
