Internal Audit Management - Archer IRM
Internal audit is the right way to go if you want to confidently hold your head high and say that your business meets all its goals and objectives.
Internal auditing can be defined as independent activities that deal with consulting and objective assurance targeted at improving an organization’s operation. Internal audit management is the process of providing independent assurance for an organization that its governance, risk management and internal control processes are working and operating effectively.
As the world is changing so fast, organizations are changing concerning the world too. They have to keep up and ensure that everything is running smoothly; internal audit management makes that possible. Internal audit management deals with providing unbiased independent assessment and review of the systems used in the organization, the processes, the controls, the managing of risks, compliance with rules and regulations and of course, data governance.
Benefits of Internal Audit Management
There are loads of benefits an organization can gain from internal audit management. Some of the benefits of internal audit management to organizations and their management are:
It promotes the accountability of resources within the organization.
The scope of the audit is designed by the management or board of directors, not a third party which makes it reliable.
It helps to improve and upgrade the control environment sector in the organization.
It makes the organization more dependent on processes than on people. This is better because people are dynamic and can change at any time, but processes stay the same unless an upgrade is issued.
It helps to identify redundancies in business operations and control procedures, and it provides ways to improve the effectiveness of the process.
It helps organizations identify threats early so that it can be remedied before it disrupts business operations.
It improves compliance in the organization because it checks the laws, rules, regulations and standards under which the organization operates and determines if the employees have been compliant or not.
Objectives of Internal Audit Management
Internal audit management has a lot of objectives, and some of them differ for different companies. The main objectives of internal audit management are:
Risk Assessment: Internal audit management helps the management of an organization identify areas, processes and procedures that require special audit focus and attention. The identified issues are tagged as high priority.
Process Documentation: It helps to understand the process and procedures the way they are before internal auditing occurs, knowing where improvement is needed. The processes and procedures are well documented in a clear, transparent format.
Control Assessment: It helps identify the areas in an organization where controls and procedures are not very well defined, designed and practical.
Testing: It performs tests on the controls in the organization to guarantee that the controls are in order, doing what exactly they are meant to do. The testing process sheds light on the controls that need to be worked on.
Reporting: It provides complete, clear and defined observations and recommendations to improve controls, processes and the overall business operations.
Differences between Internal Audit and External Audit
To fully appreciate internal audit management, you must understand the differences between internal audits and external audits.
Who is the audit performed by?
Internal audit: employees in the organization who serve as internal auditors.
External audit: external auditors (they are mostly always members of the CPA firm)
What do the audits entail?
Internal audit: internal control that handles risk management, governance and process improvement.
External audit: internal controls related to financial reporting and organizations’ financial reports.
Who is the audit reported to?
Internal audit: board of directors and managers within the organization's governance structures.
External audit: shareholders and members not on the organization’s governance structures.
When are the results reported?
Internal audit: results are reported at any interval designated by the board. It could be monthly, etc.
External audit: annually.
What are the objectives of the audits?
Internal audit: it helps to evaluate and improve the effectiveness and efficiency of the organization’s risk management, governance and control processes. It makes the board members of the organization fully capable of performing their duties to the organization and its stakeholders. It also provides board members with assurance related to their duties.
External audit: it boosts the credibility and reliability of financial reports from the organization to its stakeholders by giving honest opinions and comments on the report.
Internal audit management is crucial in a business, and having a good understanding of it will help your organization go a very long way in terms of governance, managing risks, upgrading processes and general operations. If you don’t know the right way to go about it, don’t you worry because Archer is the best solution for you. We have highly skilled experts ready to guide you on everything you need to know concerning internal auditing and its management.
What is internal audit management?
Internal audit management is the process of providing independent assurance for an organization that its governance, risk management and internal control processes are working and operating effectively.
Do internal audits and external audits cover the same things?
No. Internal audit deals with risk management, governance and process improvement, while external audit deals with financial reports and internal controls related to financial reporting.