Abstract:
Internal auditing is a profession and activity involved in advising
organizations regarding how to better achieve their objectives. Internal
auditing involves the utilization of a systematic methodology for analyzing
business processes or organizational problems and recommending solutions.
Professionals called internal auditors are employed by organizations to
perform the internal auditing activity. The scope of internal auditing within
an organization is broad and may involve internal control
topics such as the
efficacy of operations, the reliability of financial reporting, deterring and
investigating fraud, safeguarding assets, and compliance with laws and
regulations. Internal auditors are not responsible for the execution of
company activities; they advise management and the Board of Directors (or
similar oversight body) regarding how to better execute their responsibilities.
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) defines internal control as having five components: Control
Environment-sets the tone for the organization, influencing the control
consciousness of its people. It is the foundation for all other components of
internal control: Risk Assessment-the identification and analysis of relevant
risks to the achievement of objectives, forming a basis for how the risks
should be managed ;Information and Communication-systems or processes
that support the identification, capture, and exchange of information in a
form and time frame that enable people to carry out their responsibilities;
Control Activities-the policies and procedures that help ensure management
directives are carried out; Monitoring-processes used to assess the quality of
internal control performance over time.
The Internal Auditing profession evolved steadily with the progress of
management science after World War II. It is conceptually similar in many
ways to financial auditing
by public accounting firms, quality assurance and
banking compliance activities. Much of the theory underlying internal auditing
is derived from management consulting and public accounting professions.
The connection between the audit committee and the internal auditors
has grown more important in light of recent accounting reform. Audit
committees should have an understanding of internal controls around
financial reporting and a basis for evaluating the work of the internal audit
team. An organizations internal control structure is at the heart of its
processes and controls. The audit committee, with responsibility for the
organizations internal controls over financial reporting, needs to understand
the concepts of internal control in order to be effective with this charge. This
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Universitatea de Ştiinţe Agricole şi Medicină Veterinară Iaşi
section provides basic information about internal control, including what it is
and is not, how it can be used most effectively in an organization and
management's responsibilities. It includes a list of possible questions for
audit committees to consider based on the five interrelated components of an
internal control structure.
