How internal audit value-added

I. The Positioning of Value Addition of Internal Auditing

(I) The Positioning of Value Addition

Comparing the old and new definitions of internal auditing, it can be seen that the ultimate purpose of modern enterprise internal auditing is to help the enterprise to achieve the goals, and its core has been raised from preventing harm and promoting profit to The IIA's approach to the definition of ? Adding value? The IIA explains the definition as follows: ? Organizations exist to create value or to benefit the organization's owners, other shareholders customers. The way the organization delivers value is by producing products or providing services and marketing those products or services through the use of resources. In collecting, understanding, and evaluating data on risks, internal auditors gain a deeper understanding of the organization's operations and make recommendations to improve them, all of which can be very beneficial to the organization. The internal auditor can communicate this very important information to the appropriate managers or operations staff through counseling, recommendations, written reports, or other forms.?

(ii) Characteristics of Value Addition

The internal audit department contributes to the improvement of the corporate governance structure and enhances the management of the organization by intervening in the area of risk management, governance and control of the enterprise. There are very few departments in an organization that provide services to the organization's management, board of directors, and audit committee, and the internal audit department is one such department that can add value to the organization.

Second, the analysis of the value-added efficacy of internal auditing

The new definition of internal auditing will provide value-added services to the enterprise as the fundamental goal of internal auditing. Most internal audit departments used to favor protective services, focusing their audits on checking compliance with accounting systems and business procedures, verifying the accuracy of accounting, protecting the safety and integrity of assets, and detecting fraud and malpractice.

Internal audit is not a production and operation system, emphasizing the management system construction, implementation, and risk prevention, as an indirect, auxiliary activities in the enterprise value chain, how to achieve value-added functions? In my opinion, the value created by internal auditing can be roughly reflected in two aspects:

(a) the direct value of internal auditing

Internal auditing through the establishment of internal control systems and strict supervision of their implementation, to help reduce or avoid losses, when the cost of implementation of internal auditing is less than the foreseeable loss of business, the value of the enterprise will increase accordingly. When the cost of implementing internal audit is less than the foreseeable loss, the value of the enterprise increases accordingly. Modern internal audit comprehensively change the audit concept, not value-added auditing business as little as possible, can value-added traditional auditing business as much as possible to improve the efficiency of work, reduce resource consumption and cost, focus on vigorously expand the high value-added auditing business.

(ii) the indirect value of internal audit embodiment

The indirect value of the internal audit, that is, regardless of whether the internal audit found a problem, but because of the design of the corporate governance structure of the existence of the internal audit, objectively will be on the business managers and other functions within the enterprise to produce a potential deterrent effect, because they know that the internal audit department is a regular presence of the internal audit department. The internal audit department is an oversight department that exists on a regular basis and whose day-to-day work is to inspect and monitor the business activities of other departments and personnel (including general managers and other senior managers). Being subject to constant supervision and inspection by internal audit, they are forced to maintain a good control system and working order and try to improve their performance. In addition, the internal audit department can indirectly add value to the enterprise by means of information communication, coordination of management, and optimization of the value chain.

III. Ways for Internal Audit to Realize Value Addition

(A) Supply Chain Management Theory

1. Definition of Supply Chain Management

The supply chain is a chain that revolves around the core enterprise, and through the flow of information, logistics/services, and capital, the suppliers, Manufacturers, distributors, retailers until the final customer into a whole functional network chain. The materials in this chain are processed, packaged, transported, and other processes that add value, thus bringing benefits to the associated enterprises. Supply chain management is an integrated business process that brings valuable products, services, and information to consumers, from the source supplier to the final consumer.

2. Characteristics of Supply Chain Management

Supply chain management maximizes the performance of the supply chain by offsetting the conflicts between the objectives of minimizing total cost, optimizing customer service, minimizing total inventory, minimizing total cycle time, and optimizing logistics quality. It has the following distinctive features:

1) Customer satisfaction as the highest goal. It improves customer satisfaction and gains competitive advantage by reducing total supply chain costs and realizing rapid response to customer demand.

(2) Closer relationship between enterprises. Participating parties carry out cross-departmental, cross-functional, cross-business close cooperation, *** enjoy the benefits, *** share the risks, and realize multi-win.

(3) the implementation of integrated management. Supply chain management is the use of network technology and information technology, re-organization and arrangement of business processes, the pursuit of logistics / service flow, information flow and capital flow and other aspects of integration.

(4) Manage all node enterprises in the supply chain as a whole. Supply chain management covers the functional areas and processes of purchasing, manufacturing, distribution, and retailing from suppliers to final customers.

(5) Emphasizes and relies on strategic management. Supply chain management focuses on considering the survival and development of the enterprise as well as the whole supply chain from a strategic, global and long-term perspective, such as the evaluation of performance among members and the establishment of incentive mechanisms.

(2) Using value chain management theory to achieve value-added

1. Maximize the value of the organization as the highest goal

To maximize the value of the organization, it is necessary to pay attention to the most important matters of the organization as the core, that is, to pay attention to the business processes that play a decisive role in the realization of organizational goals. To accomplish this, internal auditors gather information about the business processes that departments consider critical by asking questions of directors and managers, and rank and operationalize these processes in order of importance.

2. Enhance cooperation and communication with the various departments of the organization as well as with the external audit

Internal audit can make full use of the knowledge, skills and professional competencies of the people in each department to assess relevant information, which provides more reliable and relevant information than assessing isolated information, and also enhances the linkage and cooperation with the various departments, thus resulting in more effective Organizational governance. At the same time, a robust external audit process can support the internal audit department's pursuit of efficient corporate governance, and smooth communication between the two departments can avoid inefficiencies and duplication of effort, and examine and optimize existing governance structures and business processes.

3. Through integrated management, continuous innovation of audit tools, increase off-site auditing efforts to reduce audit costs

An effective way to improve the efficiency and effectiveness of internal auditing is to continue to innovate audit tools and increase off-site auditing efforts. At present, the majority of enterprises exist in the number of internal audit personnel and enterprise scale, business volume of asymmetric contradiction, objectively require enterprises to increase the internal audit department off-site audit efforts. At the same time, the rapid development of information technology construction for off-site auditing work in the technical breakthroughs and innovation provides a new platform, design and development of audit software to achieve the electronic means of auditing, the establishment of the internal audit database has become an important means of integrated management.

4. Evaluation and control of the internal audit department as a whole

The internal audit department is part of the organization's control framework, but it must have its own control framework to monitor whether the internal audit department is performing its duties. A key way in which the internal audit department can add value and improve the governance of the organization is by successfully fulfilling the responsibilities defined by the department with the assistance of management and the board of directors.

5. Strengthening the company's strategic internal audit

Require audits of key long-term plans for the company's future. Development strategy profoundly affects the company's future prospects and destiny, and requires effective control. Strategic decision-making and strategic management is the most important and highest level of management functions, internal audit to enhance their status and value, in-depth participation in higher-level management activities, to become a true sense of value-added management internal audit.

Four, the internal audit value-added function to achieve the basis and guarantee

The value of internal audit value-added function positioning requires internal audit to provide high value-added audit services and information products, these services and products should have a high degree of strategic matching, timeliness, efficiency and other characteristics of the organization to achieve the greatest value-added. The provision of these products cannot be separated from the efficient, flexible, and interactive internal audit workflow, and the basis and fundamental guarantee of the internal audit workflow is the improvement of the internal audit operational capabilities adapted to the needs of strategic management.

(a) Diversification of the audit staff structure is the core of the operation of internal auditing from a strategic perspective

Internal auditing from a strategic perspective extends to all levels of corporate management and strategic heights, and requires the internal audit department to establish a diversified quality structure of the audit team. The establishment of this team can be achieved through follow-up education programs or recruitment from outside the organization according to the requirements of the strategic perspective of the internal audit, I believe that a more effective and feasible way is to select and recruit auditors from the management and business departments, after the audit training and two or three years of auditing practice, and then go to the review of the business areas in which they specialize in the establishment of a strategically oriented audit team will be the best way. At the same time, auditors with strategic management skills can also be transported to the company's `management senior management, to realize the positive interaction of management personnel and audit personnel training.

(2) The support of information technology is the value-added weapon of the strategy-oriented internal audit

The internal audit must be from the main audit, and gradually shifted to the support of the information platform. The internal audit department should continue to develop and apply audit software, innovative audit methods, increase off-site audit efforts, establish a set of audit information system through the audit business front and back office, reduce audit costs, improve work efficiency, increase value for the company, which is also the realization of the audit process is efficient, flexible, interactive fundamental guarantee.

(C) the effective operation of internal audit is based on the improvement of the management capacity of the audit organization

Shaping a modern value-added internal audit culture based on a strategic perspective of the concept of the internal audit of the day-to-day work of the internal audit arrangements and the organization's long-term development of the strategic needs of the organic combination; service to the organization's objectives, services to strategic risk prevention and control The company has established a strategic partnership with the management and business departments to provide more high-quality and high-value-added audit services; established a timely audit quality control system, a timely reporting and communication mechanism, and a timely and dynamic follow-up audit mechanism to strengthen the effectiveness and timeliness of the audit services; and also established a strategically oriented value-added internal audit performance evaluation and incentive mechanism for the purpose of At the same time, a strategy-oriented internal audit value-added performance evaluation and incentive mechanism should also be established to provide organizational impetus for change from traditional internal audit to modern value-added internal audit with a strategic perspective. The diversified audit staff structure, the use of modern information technology and the coordination and integration of strategy-based audit organization and management capabilities provide a full range of three-dimensional guarantee for the realization of the maximum value-added effect of internal auditing.

In summary, because internal auditors have accumulated a lot of comprehensive knowledge about the organization through practice, they are very familiar with the organization's value-creation process, and therefore is the ideal consultant to improve the organization's processes; the improvement of internal processes will also have a positive impact on suppliers and customers, so that the internal audit can also add value to external parties. According to domestic and international internal audit practice, internal audit can play a role in many aspects of the enterprise supply chain: the value-added role of individual links, such as the procurement link of the material purchasing ratio audit, can improve the rationality and effectiveness of the procurement link control, reduce the cost of procurement; the enhancement of the overall value of the enterprise, the perfect internal audit system to promote the improvement of the level of corporate management and corporate governance, manifested in the capital market is the economic value added to the enterprise. The market is the economic value added to the enterprise.