Origins and Development of Internal Auditing

Definition of Internal Auditing: An independent evaluation of the various types of operations and controls in an organization to determine whether generally accepted policies and procedures are being followed, regulations and standards are being met, resources are being used efficiently and economically, and organizational objectives are being achieved. Internal auditing is the symmetry of external auditing.

Origins of Internal Auditing:

The Institute of International Internal Auditors (IIA) first proposed a definition of internal auditing in 1947, and after more than half a century of exploration, the most recent and seventh definition of the IIA, in 2001, stated that internal auditing is an independent, objective validation and consulting activity designed to add value and to improve an organization's operations. It helps an organization achieve its objectives by applying a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

The Development Trend of Internal Auditing:

Under the new situation, corporate internal auditing presents five general development trends: internal auditing changes from compliance-oriented to management-oriented; focusing on management auditing; standardization of auditing methods; centralization of auditing function organizations; and training of corporate managers through internal auditing mechanisms.

The internal audit is changing from compliance-oriented to management-oriented.

The focus of internal auditing has changed from financial auditing to management auditing.

Internal audit working methods are gradually standardized across the enterprise.

The organization of internal audit function has changed from decentralized management to centralized management.

The main characteristics of internal auditing:

Audit institutions and auditors are located within the unit.

The content of the audit focuses more on whether the business process is effective and whether the systems are complied with and implemented.

The inward-looking nature of the service and its relative independence.

The objectivity and impartiality of the audit results are low and are dominated by recommendatory comments.