subject: WAK MODEL - THE WAY OF BEST SOLUTION FOR AN ORGANIZATION INTERNAL AUDIT PROCESS, (PART – 01) [print this page] Confronted with difficult dynamics of economic environment, businesses put an increasing emphasis on finance, management. Accounting and audit becomes more important and relevant to our daily life- as a bridge. Audit, financial, & business related education / literacy is not the only permeate in people's life but also control vital business arteries and eventually; the entire economic systems which exposed to such a business world.
I feel strongly that it is necessary to prepare everyone with a set of quantitative and analytical skills what would make them geared up to face the real financial /economical problems with confidently.
As a financial consultant, I found that without any doubt "Internal auditing" is most important than ever in business today. Internal auditing function is playing a very important role to a wide range of business from local to global business organizations of manufacturing and services industries. After a long study I discovered that if it is possible to make the whole Internal Auditing process in a framework through apply in an easy way. Then both of the parties (Auditors and business organizations) could find out the errors and resolve in the process of Internal Auditing to achieve the ultimate goal of the business.
I would like to interpretation my view on the explanation about the internal audit & auditors activities before going into the "WAK MODEL". I have tried to make clear all the parts of internal auditing ahead of the WAK MODEL because I believe that the people who are related with accounts, finance, auditing and also the business owners will understand overall about the internal auditing. What is the necessary of Internal Auditing? And where is the use of "WAK MODEL". This model will help the students/learners for bearing in mind as a career to become an internal auditor.
A. Internal audit overview:
01. Summary: Internal Audit Activity and Internal Auditor in the Ethical Culture of an Organization stresses that internal auditors, like everyone else in a company, have a role to play in corporate ethics--a role that can vary by the existence of, lack of, or degree of development of the organization's ethical culture. In fact, the internal auditor's role can be shaped as well by the existence, or lack, of an individual designated the chief ethics officer, furthermore internal auditors setting out to perform an ethics audit face both their own concerns about the often-uncharted territory of such tasks as well as the concerns of their colleagues and supervisors. Those concerns, experts say, can be allayed once such an audit is fully developed. Seemingly diaphanous notions can, in fact, be quantified and examined, and issues of appropriate versus inappropriate behavior can be addressed successfully.
02. Introduction > internal audit
These introductions describe - "the Internal Auditor's responsibilities with respect to the internal audit function. The Internal Auditor describes audit planning and scheduling, and discusses the scope and types of internal audits generally performed at the organization as well Internal auditors verify the effectiveness of their organization's internal controls and check for mismanagement, waste, or fraud. They examine and evaluate their financial and information systems, management procedures, and internal controls to ensure that records are accurate & controls are adequate. They also review company operations, evaluating their efficiency, effectiveness, and compliance with corporate policies and government regulations,
03. Why should organization audit?
There are many sophisticated management tools available to organizations to help them undertake activities like business process re-engineering, continuous performance improvement or balance scorecards and business excellence to conduct some sort of initial assessment or audit to establish a starting position or baseline, this baseline information is then used as a reference against which improvements in performance over time can be measured,
As far as data protection is concerned the key reasons for carrying out audit activities are:
Determines the risk appetite of the organization
Establishes the risk management framework
Identifies potential threats and assesses risks
Decides on response to risks like implementation of control
Monitors and coordinates the risk management processes and the outcomes,
Provides assurance on the effectiveness of risk management processes
Internal audit can be the key source providing objective assurance that all the significant risks have been identified, risk management process is working effectively and efficiently, risks are being reported and controls are effective. As part of this work, the internal audit activity will provide advice, coaching and facilitation services to assist executive management in carrying out their responsibilities.
04. Who conducts an internal audit?
Some organizations are large enough to have a designated internal audit function. However most internal audit are carried out by staff members from within the organization,
05. Definition of auditing
"Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes."
In different - "Independence allows internal auditors to carry out their work freely and objectively. This concept requires that internal auditors are independent of the activity they audit "Objectivity is an independent mental attitude which requires internal auditors to perform audits in such a manner that they have an honest belief in their work product and that no significant quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others"
06. What are the advantages of an internal audit?
An internal audit offers several advantages; I have presented some of important advantages:
In directs management's attention to the key business issues. The audit analyzes weaknesses in the system of control and become the basis for practical recommendation for improvement.
It gives management confidence when controls are operating satisfactorily.
It identifies opportunities for improving efficiency and effectiveness.
It gives early notice of potential problems, so that management can take action to head them off,
07. Scope of Internal Audits
The internal audit function's scope of operations is by its very nature quite expansive. The internal audit function will assist the College in fulfilling its vision, mission, strategic initiatives, and objectives, while adhering to its core values, by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of enterprise-wide risk management, internal control systems, and governance processes.
The external auditors have to express an opinion on accuracy and fairness of financial information. The scope of internal audit is much wider than statutory/external audit. It should ideally cover all the organization's activities. They include:
Financial audit accuracy, completeness and fairness of financial statements
Operational audit- effectiveness and efficiency of operations
Safeguarding of assets
Review of projects
Management audit
Fraud detection- developing fraud exposures for every audit and detecting red flags
Review of effectiveness of internal control
Compliance with laws, regulations, policies and procedures
Preservation of ethical culture monitors the ethical climate and report on red flags that may compromise ethics
Providing advice on reducing waste or inefficiency
08. Objectives of the internal audit:
An internal audits primary object is to examine key controls
Financial how is money handled within the organization? For example who authorizes payment, and what checks and balance are in place to prevent unauthorized spending and fraud
Administrative are these conducive to meeting strategic objectives.
System related what system are in place departmentally and across the organization and how do they fit together,
The first step is to determine which of the above considerations are you priorities and set the broad audit objectives to reflect them
(Part 01 finished > continue to Part -02)
WAK MODEL - THE WAY OF BEST SOLUTION FOR AN ORGANIZATION INTERNAL AUDIT PROCESS, (PART 01)
