Internal auditing is a function that can take a variety of forms and internal auditors can perform many different services. Internal auditing has come into the public eye in recent years due to Sarbanes-Oxley regulation and business’ effort to comply with the new regulations. Broadly speaking, internal auditing is a discipline that addresses a wide range of assurance and consulting services. Internal auditing services can be thought of as a general control function for businesses that are becoming increasingly decentralized. The Institute of Internal Auditors (IIA) is the organization that leads the internal auditing field and certifies accountants as Certified Internal Auditors (CIA).
The Purpose of Internal Auditing
While the form taken for internal auditing can vary somewhat by organization, the general purpose of internal auditing is to provide control and feedback on business operations. According to the standards for internal auditing, internal auditors must remain as independent and objective as possible to perform their job correctly. Some of the duties engaged in by an internal auditor include:
- Evaluation of a company or department’s compliance with laws and regulations
- Assessing the reliability of financial information,
- Determining the efficiency and usefulness of operations,
- Detection of fraud,
- Prevention of fraud and,
- Working with external auditors to ensure that all auditing needs are being met but not overlapping where unnecessary.
Objectivity and Independence for Internal Auditors
Objectivity and independence are just as important for internal auditors and they are for external auditors. To maintain these directives, internal auditing departments and the auditors themselves must have the support of upper-level management and internal auditors must be selected and assigned carefully to avoid situations where conflicts of interest could occur. For example, an internal auditor should not be assigned to evaluate a department or position that he or she was recently assigned to.
The Span of Internal Auditing
While the first area of expertise that may come to mind when a person considers the span of an internal auditor’s responsibility may be financial, internal auditors are also responsible for other areas of auditing. These areas include operational and compliance responsibilities. These responsibilities can range from evaluating quality control procedures to making sure that all documentation is in order for applicable environmental regulations, to ensuring that contracts are not being violated by auditing financial information. Internal auditors may also be utilized for miscellaneous consulting services.
While Sarbanes-Oxley and other issues may have brought what internal auditors do to the public eye, the profession itself is quite broad and reaches into more areas than a person might think. With businesses becoming decentralized, the importance of internal auditors will only continue to increase, as will the need for individuals with the specialized training needed to become Certified Internal Auditors (CIA).