The Tribune

By Anishka Collie

Chief Executive

ATC Financial Advisors & Consultants

Companies can establish an Internal Audit Department (IAD) to examine and evaluate, in an independent manner, their business systems and processes, along with controls and risk management. Such departments can provide recommendations to improve any weaknesses they uncover, thus providing reassurance that management and staff are discharging their responsibilities effectively and achieving corporate targets.

As defined by the Institute of Internal Auditors (IIA), internal auditing is an independent, objective assurance and consulting activity designed to add value and improve a company’s operations. It brings a systematic, disciplined approach to evaluating and improving the effectiveness of governance processes.

Whether your company’s goal offers services of physical products to customers, the IAD exists to help it achieve its goals and business objectives in an ethical, legal and well-governed manner, thus enabling it to behave as a responsible corporate citizen.

However, independence requires the IAD to have freedom from conditions that threaten its ability to properly carry out internal audit responsibilities in an unbiased manner.

To provide independence, the reporting relationships, authority, objectives and responsibility of the IAD are established by an audit committee on behalf of the company’s board of directors. The internal auditor reports to the chief executive or their equivalent for administrative purposes, and has full and independent access to the audit committee.

Internal Audit’s authority

• The IAD is established to perform internal audit and review (investigation and inspection) engagements. As such, all systems, processes, operations, functions and activities within your company are subject to an internal audit evaluation.

• The IAD must have unrestricted access to all information, documents, property and personnel. Where unrestricted access is not given, this impacts the engagement scope and effectiveness. This scope limitation should be reported to the chief executive and the audit committee.

• The board and the chief executive are to recognise the importance of an impartial and objective assessment of management’s performance, and fully support the IAD as an independent appraisal function that examines and evaluates the company’s activities as a service to the board and management.

• The internal auditor is part of, and co-operates with, the management team in a joint effort to ensure the company’s success in achieving its goals.

• The internal auditor has the authority to initiate, carry out and report on any action that is considered necessary to fulfill the IAD’s goal.

• The internal auditor and staff of the IAD are not authorised to:

• Perform any operational duties for your company or its affiliates.

• Initiate or approve accounting transactions external to the Internal Audit Department.

• Direct the activities of any company employee not engaged by the Internal Audit Department.

• Perform an internal audit of an operational department where he/she previously worked for at least one year.