Essentiality of internal control in Audit process (original) (raw)
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Procedia Economics and Finance, 2015
In a market which is competitive and affected by systemic risks that endanger the good, secure and continuous functioning of activities, the entities generate behaviours which mark rights and obligations that highlight the necessity of adequate leadership and control systems, through which a rigorous management of the risks that could affect the targeted objectives is insured. Actually, these objectives are facilitated by the existence of an independent function that evaluates the processes of governance, internal control and risk management. From this perspective, the internal audit, which is an objective and independent function, through its formulated opinions and recommendations, it supplies reasonable insurances to the management, which gives it an essential role in the frame of the analysed relationship. This study proposes testing this hypothesis, so that the carried research has focused on the identification of new valences through which the internal audit could contribute to the improvement of the corporate governance.
Internal Control and Internal Audit in the Function of Supervising the Operations of Companies
The management of a modern company is faced with the need to make business decisions regarding the achievement of business goals. Increased interest in establishing internal control is affected by the presence increased corruption and the erosion of business morality. For internal controls, everyone is interested, from external auditors to management, board of directors, shareholders of large public companies and the state. With the constant growth of the company, the decentralization of business has been compounded by the management process. Therefore, in addition to internal control, internal audit is required. The company's management cannot deal with oversight because it has to deal with strategic issues. This is where internal audit is performed as an expert service. The results of the conducted empirical research showed that the stages of development of internal control in enterprises in Montenegro do not correspond with the achieved degree of development of this profession in the countries of the developed market economy.
The Contribution of Internal Audit to the Performance of the Internal Control System
Internal control is increasingly seen as the foundation on which the company relies to ensure, on the one hand, the effectiveness and efficiency of operations, the quality of information and compliance with laws, regulations and policies, and on the other hand, to prevent and control risks that may affect the achievement of objectives. Therefore, internal control encompasses all the different types of security that exist within the organisation to provide reasonable assurance that objectives are achieved. In short, through the deployment of an effective and efficient internal control system, a company is better equipped to achieve its objectives and avoid pitfalls and imponderables. Furthermore, internal auditors are part of the steering framework. Thus, they have the possibility to carry out evaluations, whether permanent or punctual, on the other elements of internal control. Therefore, internal audit is an element of the internal control system, and its purpose is to ensure that all the company's operations are under control and that the company is managed efficiently and transparently. The ultimate objective of our research is to analyse the role of internal audit as a performance tool of the internal control system.
The Contribution of Internal Audit to the Improvement of Internal Control System
In order to be more flexible in a perpetual mutational environment and face up to damaging effects of an economic situation in strong growth, organizations have to acquire efficient management tools allowing them to accomplish their objectives and to protect themselves against inherent risks. The implementation of an internal control system is considered to be the guarantor of an invincible organizational system and a means of control of risky operations. However, an applied and well conceived internal control provides the organization just a reasonable and not an absolute insurance about its objectives realization and sustainability. It is the reason for which an upper level control, accomplished by the internal audit function, seems to be a palliative to the internal control deficiencies, and a means of supervising and evaluating the application of procedures and internal control rules. Thus, this research aims at demonstrating how internal audit can participate to the improvement of internal control system. In this context, we have introduced a qualitative study, which was based on a sample of 10 Moroccan publicly traded companies that operate in many industries. Through the interviews conducted with this sample, we had identified firstly, the different control levels within organizations, and their degree of effectiveness and their capacity to face up risks as well as the limits of each type of control. Secondly, this research explored that internal audit is considered as a response to the insufficiencies of different lower control levels, and a means of monitoring and piloting the effectiveness of internal control system, across notably the recommendations provided
Internal auditing practices and internal control system
Managerial Auditing Journal, 2005
Using data from 250 auditing practitioners from Kuala Lumpur Stock Exchange (currently known as Bursa Malaysia) -listed companies, this study suggests that independence, scope of audit work, audit reporting, audit programs, management of internal audit department, performance of audit work, audit reviews, objectivity and professional proficiency are important internal auditing practices from the perception of internal auditors. This study also suggests that risk assessment, control activities, control environment, information and communication and monitoring are important quality of internal control system from the perception of audit committee.
Issues of Evaluating the Effectiveness of the Internal Control System in Audits
International Journal of Multicultural and Multireligious Understanding
This article describes the areas of evaluation of the effectiveness of the internal control system in audits. As a result of the research, 5 stages of evaluating the effectiveness of the internal control system are proposed. The author has also developed internal control evaluation steps.
Considerations Concerning the Sphere of the Activities of Internal Auditing
2008
The internal audit has known a continuous evolution, the sphere of the specific activities being gradually extended from the financial and accounting area to the entity's operational area. This aspect is significantly influenced, among others, by the subordination means of the department of internal audit within the entity, as well as by the range of services which could be offered to the decisional factors. In this sense, the present material debates the connection between the position of the function within the entity and the exigencies which are imposed as far as the assessment of the objectives for the internal auditors is concerned. In the same time, we will talk about the range of services which have been offered by the internal auditors both from the perspective of the needs for their beneficiaries, as well as of the independence which characterises this kind of services. In the same time, we have approached the range of the specific services for the missions of this nature. The approach concerning the positioning of the internal audit aims, on one side, at its role as a main instrument of the entity as far as the monitoring of the risks is concerned and the assurance of the quality for the internal control devices which have been instituted by the entity, and on the other side, the need to assure the adequate independence for the accomplishment of such desiderata. As far as the services which have been offered by the auditors are concerned, within this material, they are subjected to the analysis from the perspective of their beneficiaries, as well as under the aspect of the compatibility between the assurance services and the consultancy services.
ICORE, 2020
This study aims to determine the effect of the effectiveness of the internal control system on the quality of financial statements with the implementation of internal audit as a moderating variable. This research is motivated by a disclaimer opinion on the Financial Statements of the Ministry of Maritime Affairs and Fisheries in 2016 and 2017. This indicates that the implementation of internal audits at the Ministry of Maritime Affairs and Fisheries has not been optimal. This study uses the causality method with a sample of 74 people from 90 internal auditors who were selected based on stratified random sampling according to their level of position. The results of the study indicate that the implementation of internal audits and the quality of financial reports at KKP has been very good. This is in accordance with the hypothesis and previous research which shows that there is an influence of the implementation of internal audit on financial reporting quality. The benefit of this research is to contribute scientifically to public sector audit science and solve problems for governments throughout the ministry in improving the quality of financial reports. Through the implementation of internal audits and increasing the effectiveness of the internal control system. The results of this study state that the effectiveness of the internal control system no affects on the quality of financial statements. If the implementation of internal audit as a moderating variable the results still have an effect on the quality of financial statements. Moderation in this study is quasi moderation, because the results of the initial research influence the results of moderation still have an effect.
The Relative Effects of Elements of Internal Control on Auditors’ Evaluations of Internal Control
Pacific Accounting Review, 2006
Internal control evaluation is a critical component of the overall audit process, mandated by auditing standards worldwide. These standards divide internal control structures into a number of elements, summarised as the control environment, information systems, and control procedures. Significant research exists as to auditors' evaluations of internal controls. However, little work appears to consider the elements' inter-actions and relative significance.
Contemporary Approaches in Internal Audit
Procedia Economics and Finance, 2014
Abstract The object of this paper is to present the role of internal audit in the contemporary life of a company. Internal audit function plays a major role in the enterprise, carrying on control in financial field and all others settled by management, safeguarding the corporate assets and ensuring the security of accurate records. Between internal audit and the prosperity of a company, there is a strong link which leads to increase the value of the company and achieve its objectives. The relevance of internal audit reporting is given also by adapting its function to the changing expectations and its alignment to fraud prevention policies, aside with risk evaluation and improvement of control strategies.