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Unformatted text preview: Internal Auditing Definition of Internal Auditing An independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Auditing services fall into three fundamental categories: 1) Operational - reviewing the various functions within the organization in order to appraise the efficiency and economy of operations and the effectiveness with which the functions achieve their objectives. 2) Financial - reviewing the economic activity of the organization as it is measured and reported by accounting methods. 3) Compliance - reviewing both financial and operating controls and transactions to determine whether they conform to laws, standards, regulations and procedures. Responsibilities of the Internal Auditing Function The responsibility of the internal auditor is to review and appraise policies, procedures, plans and records for the purpose of informing and advising management. However, internal auditors do not have any authority or responsibility over operating activities (it conflict with the independency) The responsibility of internal audit ends with the making of recommendations Internal Auditors and Internal Control System The company's management including the board of directors is responsible for the organization's internal control; internal auditors are utilized to monitor the performance of the organization's internal control systems in an effective and efficient manner. The Organizational Status of the Internal Audit Function The Internal audit must have adequate authority and freedom to carry out the activities that need to be accomplished. The internal auditors need to be supported by both the audit committee and the board. The internal audit function should report to the board of directors through the audit committee. The internal audit must also have organizational independence. The Difference between Internal Auditors and External Auditors The external auditors, or independent auditors, perform the financial statement audit, and every thing related to it. The External auditor objectives is to: 1- Express an opinion on whether the financial statements presented fairly....
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This note was uploaded on 08/16/2011 for the course MGMT 301 taught by Professor Hisham during the Spring '11 term at McMaster University.
- Spring '11