Internal Audit: Objectives and Responsibilities

Definition of Internal Audit, Purpose and Responsibility of Internal Audit and Internal Audit Standards

Amr Farag - • Internal Control

Definition of Internal Audit, its objectives and responsibilities:

- Cell :

- It is an independent and objective activity that provides advisory services and assurance is neutral and independent.

Objective and responsibility of internal audit :

- Add value and improve the organization's operations by helping the organization achieve its objectives by providing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management and internal control processes.

Internal Audit Standards :

- Standard No. 1000 - The standard clarifies the objectives, powers and responsibilities of internal auditing and is specified within the Internal Audit Charter, in line with the International Framework for Professional Practices and the definition of internal auditing, code of ethics, internal auditing standards.

Internal audit performance :

- Standard 1100 Independence and impartiality

- Audit work of advisory services and tasks to ensure the internal control systems must be carried out independently and impartially.

- Definition of independence Independence is freedom from circumstances that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an impartial manner.

Definition of neutrality :

It is an unbiased mode of mind that authorizes internal auditors to perform internal audit tasks in a way that makes them believe in the safety and quality of their work without compromise.

- There are some cases that can affect and weaken the independence and impartiality of the internal auditor, including :

Acts that affect the independence of the internal auditor, for example, but not limited to :

- Creating a domain on the internal auditor, limiting his powers and preventing his access to some documents and records.

- The existence of a conflict of interest, such as auditing an employee who is related to the internal auditor or making remuneration from the financial director or the general manager of the internal audit department, which weakens the impartiality of the auditor.

- The internal audit department should be subordinate to the administrative structure of the general manager or any department within the company's departments.

Acts affecting the impartiality of the internal auditor :

• The internal auditor shall carry out the work of reviewing items that were his responsibilities

– The internal auditor must refrain from evaluating and performing any review work for items he was responsible for implementing before his appointment in the internal audit department of the same company

– Disclosure must be made before entering into the audit procedures and accepting the audit task to the Board of Directors and the Internal Audit Committee in the event that there is a possibility that this will affect the independence and impartiality of the internal auditor

– In the event that the Director of the Internal Audit Department carries out a review work on items that were his responsibilities, in this case, the working papers for those works must be read to parties outside the Internal Audit Department.

The independence of internal audit is effectively reached with the submission of audit reports to the Board of Directors, and there are some examples of the link between internal audit and the Board of Directors, including:

– Approval of the Internal Audit Charter by the Board of Directors.

– Approving the internal audit plan.

– Submit a report on the performance and results of the audit work and the implementation of the audit plan.

– Approving the appointments of the internal audit manager, determining his salary and terminating his contract.

– In the event that there is anything that affects the independence of the auditor, any work he encounters in his report that may affect his independence and violate the internal audit charter approved by the Board of Directors and the Internal Audit Committee must be disclosed.

Separation of tasks and powers :

– The task of accreditation must be separated from the registration task from the custody officer, and they are three tasks that must be separated in any company to make an efficient control tool within the company, and the auditor must confirm and recommend this in the absence of it and then verify its effectiveness.

– An example of a sales cycle model to illustrate how to separate powers

– Conduct professional due diligence

Conducting due diligence does not mean the infallibility of the internal auditor, but performing work tasks efficiently and giving reasonable assurance, taking into account the following :

– The cost of the audit procedures and the expected return from them.

– Important and influential items, taking into account the relative importance of the review items.

– Efficiency and effectiveness of internal controls and risk management.

– The possibility of significant risks and the possibility of non-compliance with policies and legislation for some items.

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