the Definition, the Code of Ethics, the Standards and the Practice Advisories. Additionally, internal auditors should follow the INTOSAI Code of Ethics. In addition to its role of monitoring an entity’s internal control, an adequate internal audit staff can contribute to the efficiency of the external audit efforts by providing direct assistance to the external auditor. The nature, scope, or timing of the external auditor’s procedures may be modified if the external auditor can rely upon the internal auditor’s work. 2.2.3 Staff members and external stakeholder Staff members and other personnel also effect internal control.
Purpose The purpose of this literature review is to determine and discuss the factors of internal audit effectiveness. The factors being, the Institute of Internal Auditing standards along with characteristics of the internal audit, quality internal audit and internal audit theories. 1. Institute of Internal Auditors Standards along with characteristics of the internal audit team 1.1 Compliance with standards Compliance with Institute of Internal Auditing Standards has great influence on the effectiveness of internal auditing, therefore when complied with these standards the effectiveness of internal audit is expected to increase (Little, et al., n.d.). All internal auditors are accountable for complying with the standards related to individual
Internal control is a process designed and affected by those charged with governance, management and other personnel to provide reasonable assurance about achievement of the entity’s objective with regards to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations. Internal control is designed and implemented to address risks that threaten achievement of any of these objectives. Internal control system as described by Basu (2006), is the whole system of controls, financial or otherwise, established by the management in order to carry on the business of the enterprise in orderly and efficient manner, ensure adherence to management policies, safeguard assets and secure as far as possible the completeness and accuracy of records. According to COSO (2002), internal control comprises of the following components; the control environment, the entity’s risk assessment process, the information and communication system, control activities and
The organization communicates with the outside parties concerning the matters which affect the roles of the internal controls. Control objectives 13. The organization normally selects and then improves the control activities which contribute to the modification of the risks to the accomplishment of the objectives to the satisfactory levels. 14. The organization chooses and improves the overall control activities over the technology in order to support the accomplishment of objectives.
OCTOBER, 2016 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction This chapter is the compilation of definitions and nature of internal controls system and internal audit, classifications of internal control systems as well as the critical areas of such system. It also considers the role of internal controls as well audit used of internal control. 2.1 Overview and Concept of Internal Control and Internal Audit Internal controls is one of the most important and fundamental concepts that business professionals at all levels and both external and internal auditors must understand. A system of strong internal controls has been and continues to be the basis for effective operational and accounting business processes.The business
Day to day I am auditing government entities accountability, financials, and internal controls. I know and understand the importance of internal controls and the faith the public put in us to ensure their dollars are being spent properly. Lastly, I have done an extensive amount of research, so I am knowledgably on this issue.
Referring to Mills (1993:84), it also figured out the similar argument that competence of auditor can be observed from two factors: knowledge and behavior in which knowledge itself is related to education, skills and experience. The result of education, training and experience will lead to knowledge and skills. Somethings in the system, sub-systems and application may be reduced, such as inaccurate records, improper accounting methods, poor business interruption and decision making, violation of laws or regulations, increases on costs, loss of capitals and competitive positions of markets, due to the entering of competence of human resources (Sawyer et al, 2006: 113). The function of internal audit should be independent in which the internal auditors have to aim on the objective in proceeding their works and tasks. The independence of the firms refers to the situation of the internal audit function while the auditor’s objectivity refers to the individual’s mental attitude.
organizational structure and ethical considerations of internal control environment and how it influences financial performance in NGO sector. 2.2.1 Human resource policies and procedures and financial performance Human resource policies and procedures clears out the ways in which certain actions such as hiring and firing, compensation and promotion concerning people should be carried out by management or individual managers (Armstrong, 2001). Such human resource policies and procedures should be written down to guide managerial decision and action on personnel and ensure that the policies are applied consistently. Armstrong (2001), outlined the procedures and policies for recruitment which should exist in written form to include obtaining
Therefore, increased capability of IT tools and managers will be able to increase their visibility of an organization’s daily conditions. IT system has a lot to do with ongoing feedback and management control which requires to measure and evaluate the organization’s individual unit performance. Just like in icddr,b, budgeting will facilitate decision making when proper IT system is in place and it will assist each department to come up with a more realistic objective. l) The Internal Oversight Department (IOD) needs to be strengthened at priority through recruitment of qualified staff to ensure timely and effective completion of internal Audit (IA) reviews. The Internal audit manual should be finalized and disseminated to the staff for understanding the necessary requirements to be complied with as part of the IA review.
Based on the auditor’s understanding of the company ’s objectives and strategies, the auditor makes an assessment of the related business risks that may result in material misstatement of the financial statements. Internal control is one of the principal elements in the management of risk and a sound system of internal control depends on a thorough and regular evaluation of the nature and extent of the risks to which a company is exposed. Environmental matters may be a significant source of risk. Where this is the case, an internal control system would not be effective unless it covered items giving rise to environmental risk. Where environmental issues are a significant risk to the reliability of the financial statements, it is possible that the auditor will decide to evaluate the design and implementation of environmental controls.