The internal auditor deals with providing independent assurance on the organisations risk management and internal control processes. There are two types of internal audits namely:
- Financial Internal Audit – Involves gathering evidence of the company’s records, to reaffirm information in the management accounts and financial statements.
- Operational Internal Audit – Involves monitoring the performance of management to ensure company policies are followed for efficiency auditing.
The internal auditors are not normally subject to any regulatory authority. However some of the limitations of internal audits include:
- Failing to audit the activities of a company independently.
- Failure of directors to consider and act upon internal audit reports.
- Subjective approach to the handling of company records.
Recent years has shown an increase in companies outsourcing internal audit functions to accounting firms. The benefits and drawbacks of outsourcing includes:
|Increased Reliability.||Will be a cost to the company.|
|Have the relevant accounting and auditing knowledge.||May cause independence issues if an external auditor provides internal audit functions in the same organisation.|
|More chance of internal auditors acting independently.|