What is Internal Audit
Internal Audit is defined as “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, disciplined approach to evaluate and improve effectiveness of risk management, control and governance processes.”
Institute of Internal Auditors UK and Ireland, August 1999
Internal audit has a responsibility for looking at controls in respect of all major risks facing an organisation, not just financial ones.
The current environment of corporate failure has led to a great deal of discussion in all sectors about the desirability of making internal audit compulsory. At present, it is not compulsory either in housing associations or listed companies, though it is in most organisations that receive government funding. Where there is no internal audit service, best practice suggests an annual review by the Board of the need for it, as well as a formal record of its decision.
Whether it is mandatory or not, a service whose purpose and remit is not clearly understood by those commissioning it, is unlikely to provide the required level of assurance. It is therefore important to understand what internal audit can do, what it should do and to draft a clear specification of expectations.