While the world of trading expands all through the time, and the competence in the various industries increased as well, all organizations try to do their best to achieve their objectives and to satisfy their customers. Here arises the role of internal auditing which is to assist management to maximizing the opportunities and to minimizing the threats to the organization. Internal auditing must maximize the assurance provided to the board, the audit committee and the management, and contribute to the continuous improvement strategies for the organization. So, how to maintain good internal auditing function within the organization? Outsourcing of internal audit function is one of the solutions. So, what is internal auditing? What is outsourcing of internal audit function? How could outsourcing of internal audit function help the role of internal auditing? All these questions and other which could be arise will be answered in this report.
What is Internal 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. Professionals called internal auditors are employed by organizations to perform the internal auditing activity. (7,page1-2)
How Does Internal Auditing Help Organizations to Achieve Their Objectives? An organization's objectives define what the organization wants to achieve, and its ongoing success depends on the accomplishment of its objectives. At the highest level these objectives are reflected in the organization's mission and vision statements. There is no single right way to categorize business objectives; therefore the categorization of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2004 will be used here. These objectives are as follows: 1.
Understandable and measurable business objectives represent achievement targets and, accordingly, establish parameters for evaluating actual achievements over time. From and internal auditor's perspective, business objectives provide a foundation for defining engagement objectives. The direct link between business objectives and internal audit engagement objectives sets the stage for internal auditors to help the organization achieve its objectives. (7,page1-3)
OUTSOURCING THE AUDIT FUNCTION
The Meaning of Outsourcing The Audit Function:
An outsourcing arrangement is a contract between an organization and an audit firm to provide internal audit services. Outsourcing internal audit function takes many forms and is used by organizations of all sizes. Some organizations consider entering into these arrangements to enhance the quality of their control environment by obtaining the services of an audit firm with the knowledge and skills to critically assess, and recommend improvements to their internal audit function. (6,page7)
There are two outsourcing options which are:
Many organizations find that outsourcing the entire internal audit function is the best option. Full outsourcing involves the audit firm conducting all internal audit reviews as agreed throughout the year. It does not necessarily mean disbanding the entire audit team or having no in-house resource. It may be both possible and practical to retain a high level resource in-house. The preferred choice for this resource is likely to be a chief internal auditor who can assess the ongoing needs of both the internal audit process and the organization itself. This individual has a key role to play in planning the allocation of internal audit resources and communicating with the Audit Committee...
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