Internal Audit and Controls… What & Why?
An internal auditors’ role includes monitoring, assessing, and analyzing organizational risk and controls; and also reviewing and confirming information and compliance with policies, procedures, and laws. Working in partnership with management, internal auditors provide the board, the audit committee, and executive management assurance that risks are mitigated and that the organization’s corporate governance is strong and effective. When there is need for improvement, internal auditors make recommendations for enhancing processes, policies, and procedures.
The internal audit activity evaluates risk exposures relating to the organization’s governance, operations, and information systems, in the following areas:
- Effectiveness and efficiency of operations.
- Reliability and integrity of financial and operational information.
- Safeguarding of assets.
- Compliance with laws, regulations, and contracts.
Based on the results of the risk assessment, the internal auditors evaluate the adequacy and effectiveness of how risks are identified and managed in these above areas. The internal auditors are expected to provide recommendations for improvement in those areas where opportunities are identified.
To achieve quality, processes must first be controlled. To improve quality, controlled processes must be measured and evaluated to identify obstacles to success. Effective internal controls open the door to achieving success. One key issue of consideration for any business – “Is there reasonable assurance of achieving our mission, objectives, goals and desired outcomes, while adhering to laws and regulations; and can we accurately report our success and outcomes to our clients?”
The following are some of the more significant mechanisms a management company facilitates daily that an internal auditor would evaluate:
- Segregation of duties
- Written policies & procedures in place
- Organizational structure
- Authorization and approval
- Bank reconciliation review
- Proper training and development
To get the highest level of achievement and success, we must constantly identify and establish effective controls, continually assess the risks, monitor control implementation, and modify controls to adhere to new laws, rules and regulations.
Rachel Richmond, CMCA®
Principal Management Group of Houston, AAMC
This article is provided by Associa Living.