Thursday, August 9, 2012

Internal Audit Committee & Internal Audit Function Roles or Duties

Roles or Duties are the benefits that they provide to the organization.

 

Roles or Duties of Internal Audit Committee

Audit committee reviews the financial statements before it is presented to the board for authorization.

Audit committee comprised of independent non-executive directors, which provides independent scrutiny on internal control and risk management process.

It creates a climate of discipline and trust which reduces the likelihood of fraud.

It boosts public confidence in the company. Therefore, future financing needs of the organization can be satisfied easily.

It strengthens the position of both the internal & external auditor by providing forum for discussion in the event of dispute with management.

It reviews the work of internal audit function and ensures the effectiveness of internal control system. If there is no internal audit function, then it assesses the need for one.

It provides a forum for finance director to raise issue of concern, which was disregarded by executive directors.

 

Roles or duties of Internal Audit Function/Department

Internal audit function has operational role. It means evaluating the effectiveness of internal control system and reporting any weakness identified. They are not responsible for establishing internal controls. Board of directors should establish suitable internal controls necessary for successful implementation of strategy and achievement of objectives.

Internal audit function receives regular feedback reports from all areas of the organization.

Internal audit function liaises with external auditor to provide information on work of internal audit and make representations on areas of concern.

Internal audit function reviews control procedures on behalf of board of directors. Control procedures such as segregation of chairperson and CEO duties.

Internal audit function reviews policies for internal control.

Internal audit function is responsible for reporting its findings on internal controls to audit committee.

Internal audit function communicates control procedures to all employees around the organization and ensures that employees understand them. For that purpose, they should respond to queries made by employees from various parts of the organization.

In the absence of risk management function, internal audit performs all the roles of risk management function.