Internal Audit Characteristics and Scope

I. Characteristics of Internal Auditing

Many textbooks talk about the characteristics of internal auditing will be compared with external auditing, which is really easy to understand, but for non-auditing professionals, but also to internal auditing and external auditing at the same time. We are here to talk about internal audit to talk about internal audit, from the perspective of the business organization to talk about the characteristics of internal audit.

1. Internal audit is a product of the development of business organizations to a certain stage. Internal audit does not appear with the establishment of the business organization, but the product of a certain stage of development of the business organization. This is not the same as the financial, personnel, administrative, sales, production and other functional units inside the business organization `. As soon as the enterprise organization is established, production, sales, finance, personnel, administration will naturally appear, which is the need for the survival of the enterprise organization. And the development of business organizations to a certain size, especially the larger the scale, the more branches, the greater the demand for internal audit.

2. Internal audit is a management tool for business organizations. The board of directors, external audit, internal audit is the three cornerstones of corporate organizational governance. And internal audit is a broad management tools. Internal audit is not just to review the financial vouchers, financial statements, and not just to evaluate the economic matters that have occurred or are occurring, and more importantly, to promote the realization of the strategic objectives of the business organization. In the value chain of the enterprise organization, internal audit also creates value for the enterprise organization. The internal audit that is detached from the management will also be abandoned by the management and eventually become a decoration. This is proven in practice.

3. Supervision function is the basis of the role of internal audit. Supervision function is the basic function of internal audit. The board of directors, management is to be through the internal audit to the operation of the various levels of supervision. Through supervision, the audit department found internal control deficiencies, found that need to draw management's attention to the major risks, found fraud, found irregularities, and so on. If the internal audit can not give full play to the supervision function, then the service and consulting functions are just empty talk.

4. Internal audit has relative independence. The advantages of internal audit in business organizations and can play a role in the conditions is to maintain relative independence. First of all, let's talk about independence. Internal audit should not be involved in specific business activities, should not be affected by other functions of the business organization. The internal audit department should report directly to the board of directors and management. Only with independence can internal audit maintain objectivity and fairness in its evaluation. The so-called relative, refers to the internal audit can not be completely detached from the connection with the specific operation of the business organization, in the conditions of survival and development of the enterprise, independent of the audit opinion.

Second, the scope of internal audit

With a developmental perspective, the scope of internal auditing from small to large, from financial to operational, there are operations to internal control and risk management gradually expand. We look at the scope of internal audit from three perspectives.

1. From the perspective of business management process, internal audit involves almost all aspects of business management: production, sales, finance, personnel, administration and so on.

2. From the perspective of business management level, internal audit can be involved in both the operational level, but also strategic decision-making level.

3. From the perspective of time, internal audit can be carried out beforehand, during and after the audit inspection.

The scope of internal audit can be the theoretical scope of the audit and the scope of the audit in practice. Theoretically, the scope of the audit is very broad, all the economic behavior of business organizations and matters can be used as an audit object. But the actual scope of the audit, but also by the management requirements, the audit department's ability to audit the department's resources and many other factors, the audit department would like to audit what will be audited, what is not their own say.

Three, summary

In any case, to understand the characteristics and scope of internal auditing, are to practice internal auditing in a specific business organization environment. Auditors can go on to gradually practice their own audit philosophy, provided that it is consistent with the values of the business organization.