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By Richard Hill, Internal Audit
Workers’ Compensation Fund - Utah
On April 13, 2005, the Securities and Exchange Commission (SEC) met to discuss the implementation of reporting requirements of Section 404 of the Sarbanes-Oxley Act. They came to this conclusion: “Internal auditors are an indispensable cornerstone of effective corporate governance, a critical component to effective and efficient operations, and an invaluable contributor to an organization’s system of internal control.”
Internal audit is invaluable to an organization because of its uniqueness. According to the Institute of Internal Auditors (IIA), “Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”
Internal audit includes quantifying and examining the company and generating reports that are detailed and descriptive. Internal auditors review every department and activity in the company. They have an all-encompassing understanding of the company because of their hands-on experience of gathering and evaluating information from every department. New managers and top executives are often given the opportunity to be interns as internal auditors before they are put into their position so they may have a better grasp on how the company runs. Upper management supports the internal auditors and learns from the information they provide.
Internal auditors often go beyond reviewing operations, identifying deficiencies, and obtaining corrective action. They also identify any principles of management and good business administration which may be violated, and what permits the violations to occur. They are helping to improve and enhance management itself. Internal auditing also involves consulting, assurance, and control self-assessment.
It is important to understand why internal auditing is valuable. “Not only does promoting internal auditing help build an understanding of what [a company] does, but it also positions internal auditors to better protect their organizations and stakeholders,” quotes IIA president, Dave Richards.
Internal audit is quality control for a company, which is absolutely necessary for success in today’s highly competitive business world. Management does, and will continue to place heavy importance on internal audit and the value it provides to the company.
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