The Internal Audit Function

The fundamental role of internal audit function is to provide independent assurance on the effectiveness and adequacy of internal control system, risk management and governance of an organization. This assurance is provided to the key stakeholders of an organization, which are the board audit committee (BOA) and executive management. Internal audit function is required by laws of most countries and regulatory authorities of most industries to be in place. In practically every business, internal audit function is required to give feedback to key stakeholders that business objectives will be realized and internal control system are working as expected. In highly regulated industries such as financial services (banks, insurance companies, investment and capital firm, credit unions, payment card firms), oil and gas, telecoms, media, consumer goods and other service industries, internal audit is a must and a minimum requirement for issuance of operating licenses.

However, for businesses that wish to ensure good corporate governance and professionalism as part of its organizational culture, establishing an internal audit function is a requirement that cannot be waived. Therefore, one of the indices of determining a healthy and well run organization is the entrenchment of an independent internal audit department with clear authority from the highest decision making arm of the organization (Board of Directors). These are usually what investors look out for in determining where to invest in a company for safety if its funds and good returns on investment. Experience has also shown that organizations with good internal control system, risk management culture and internal audit practice enjoy good patronage from customers and investors alike as nobody will invest its resources in a business with poor corporate governance and weak internal controls. As such, investors always look at the financial statement or report of a company they intend to invest in for independent opinion of auditors on the affairs of the company.

Internal audit provides independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization in realizing its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of internal control, risk management and governance processes.

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