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Introduction to Internal & Computer Audit


Modern internal auditing emerged in the 1940s as a checking function. It had become mandatory in parts of the public sector and was an extension of both external audit and branch inspection in the private sector. It developed to include compliance with laws, regulations, corporate policies and procedures.

In the 1970s, professional standards were established and the focus of internal auditing became the assessment of controls. Flowcharts were used to record processes and document flows. Audit programs and control questionnaires were introduced.

During the 1980s, in response to the introduction of new tools and methods, computer audit became established. It included interrogations, application audits, data centre audits and the audit of systems under development. A more formal systems based approach became prevalent, based on the evaluation of existing controls against desired key controls or control objectives. Multi-year audit cycles were introduced and were enhanced by the use of risk assessments to prioritise audits and determine audit intervals.

The 1990s brought a focus on risk with many internal audit functions adopting a risk-based approach. Control Risk Self Assessment (CRSA) was widely adopted, reinforcing internal audit’s role as a facilitator, and there was more emphasis on adding value. Audit planning became more dynamic and focused on ensuring coverage of key risks.

Today internal auditing has become a cornerstone of Corporate Governance. As greater transparency is required on risk and control issues internal audit has adopted a more proactive approach. It now assesses all types of risk and controls across all business activities.

The role of internal audit

The Institute of Internal Auditors defines internal auditing as follows:

Internal auditing is an independent objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Internal audit objectives

Internal auditing’s overall objective is to provide management with information and guidance to help them manage the business and make key business decisions. Within this overall objective are 3 specific objectives:

  1. To provide crucial reassurance regarding risk and control
  2. To maximise the economy, efficiency and effectiveness of business processes
  3. To make sure that best practise is properly disseminated

The scope of internal audit

Internal audit should examine and evaluate the adequacy and effectiveness of the organisation’s systems of internal control, including risk management and compliance, and its quality of performance in carrying out assigned responsibilities. This scope includes:

  • reviewing the reliability and integrity of financial and operating information and the means used to identify, measure, classify and report such information
  • reviewing the systems established to ensure compliance with those policies, plans, procedures, laws and regulations which have a significant impact on operations and reports, and determining whether the group actually does comply
  • reviewing the means of safeguarding assets and, as appropriate, verifying the existence of such assets
  • appraising the economy, efficiency and effectiveness with which these resources are employed
  • reviewing operations of programmes to ascertain whether results are consistent with established objectives and goals, and whether they are being carried

Internal auditing as a career

If used correctly and resourced accordingly, internal audit can greatly assist management in achieving corporate goals, as well as being a powerful driver for change.

Being so close to the heart of a business, allied with its potential sphere of influence throughout a group, makes internal auditing a highly rewarding career in its own right. However, the skills and breadth of knowledge that can be acquired while auditing, also mean that internal auditing can be the perfect springboard for a variety of other roles, either in other areas of corporate governance or within management more broadly.

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