Internal auditing is an independent, objective assurance, and consulting activity that aims to help organizations accomplish their goals by evaluating and improving the effectiveness of control, risk management, and governance processes, according to the IIA (Institute of Internal Auditors).
Professionals who understand their organizations’ business cultures, information systems, and processes perform the internal audits to ensure that the internal controls in place adequately mitigate potential risks. Internal auditors are employees of their organizations, while external auditors work for outside audit firms.
The role of internal auditors is to ensure their organizations comply with laws and regulations. They also help their companies maintain timely and accurate data collection and financial reporting.
Typically, internal auditors focus on a department, gather information about its current internal control process, perform fieldwork testing, follow-up with department staff about any issues they identify and prepare an official audit report. The auditors first review the report with management. Then they follow-up with management and the board of directors to ensure the company has implemented the report’s recommendations.
The internal audit report gives leadership the necessary tools to help the business operate more efficiently by identifying problems and correcting issues before the external auditors discover them.
Many organizations have audit committees that oversee the internal audit function on behalf of the board of directors. The audit committee ensures that the internal auditors are able to operate independently from the business and that management visibly supports them.