The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements

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Scoring on dimensions such as professionalism, quality of counsel, timeliness of work product, utility of meetings, and quality of status updates are typical with such surveys. Understanding the expectations of senior management and the audit committee represent important steps in developing a performance measurement process, as well as how such measures help align the audit function with organizational priorities.

The Chief Audit Executive CAE typically reports the most critical issues to the Audit Committee quarterly, along with management's progress towards resolving them.

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Critical issues typically have a reasonable likelihood of causing substantial financial or reputational damage to the company. For particularly complex issues, the responsible manager may participate in the discussion. Such reporting is critical to ensure the function is respected, that the proper " tone at the top " exists in the organization, and to expedite resolution of such issues.

It is a matter of considerable judgment to select appropriate issues for the Audit Committee's attention and to describe them in the proper context. Some of the philosophy and approach of internal auditing is derived from the work of Lawrence Sawyer. His philosophy and guidance on the role of internal audit was a forerunner of the current definition of internal auditing.

He encouraged the modern internal auditor to act as a counselor to management rather than as an adversary. Sawyer saw auditors as active players influencing events in the business rather than criticizing all degrees of errors and mistakes. He also foresaw a more desirable auditor future involving a stronger relationship with members of Audit Committee and the Board and a divorce from direct reporting to the Chief Financial Officer. Writing about positive observations in audit reports was rarely done until Sawyer started talking about the idea. He understood and forecast the benefits of providing more balanced reporting while simultaneously building better relationships.

Sawyer understood the psychology of interpersonal dynamics and the need for all people to receive acknowledgment and validation for relationships to prosper.

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Sawyer helped make internal auditing more relevant and more interesting through a sharp focus on operational or performance auditing. He strongly encouraged looking beyond financial statements and financial-related auditing into areas such as purchasing, warehousing and distribution, human resources, information technology, facilities management, customer service, field operations, and program management.

This approach helped catapult the chief audit executive into the role of a respected and knowledgeable adviser who was thought to be reasonable, objective, and concerned about helping the organization achieve the stated goals.


From Wikipedia, the free encyclopedia. Key concepts. Selected accounts. Accounting standards. Financial statements. Financial Internal Firms Report. People and organizations. Accountants Accounting organizations Luca Pacioli. May July The Accounting Review. September Turkish Studies. Archived from the original on Retrieved Internal Audit Expert.

Archived from the original on 13 December Retrieved 12 December Archived from the original on 7 December Retrieved 3 December November IIA Research Foundation. Internal auditing practices was measured by the items listed in the SPPIA and the internal control was measured by means of the statement on internal control: guidance for directors of public listed companies.

The Effect of the Internal Auditing on Financial Performance

The population used in this study was all the companies listed in the Bursa Malaysia in This study used both descriptive and inferential analyses. It was found that management of internal audit department, professional proficiency, objectivity and review significantly influence the monitoring aspect of the internal control system. Scope of work and performance of audit work significantly influences the information and communication aspect of the internal control system while performance of audit work, professional proficiency and objectivity significantly influence the control environment aspect of the internal control system.

The study also shows that management of internal audit department, performance of audit work, audit program and audit reporting significantly influences the risk assessment aspect of the internal control system.

Committees and Affiliate Leaders

Lastly, performance of audit work and audit reporting significantly influences the control activities aspect of the internal control system. The research has contributed to the agency theory with respect to the bonding costs that management has to pay to the internal auditors for the best interest of the principals of the companies. Another important implication pertains to the extent of the internal auditing practices among internal auditors in Malaysian public listed companies.