At the present time, economic institutions are getting bigger and facing a lot of problems and a difficulty to deal with all the risks. The amount of success that any institution is achieving depends to a large extent on the ability and efficiency of its leadership and especially the internal audit inspectorate within the institution.
The audit is one of the most important functions in the economic institution, for it is important in developing and improving the quality of control and evaluating the efficiency of using economic and human resources, especially the assessment of risks and trying to reduce them especially those related to the institution activities and its surroundings.
Internal audit is an important mean used to manage institutions in order to ensure that administrative units are complying with financial policies, administrative regulations. Activating a sound internal audit system and ensuring the proper application of it is considered the institution responsibility.
The audit profession comes from the need to verify the validity of the accounting and financial statements that auditor relies on to make decisions and to ensure that these data conform with the fact that it produces.
The audit is the procedures followed by an independent, qualified, impartial person to collect and evaluate evidence of information (through quantities or amounts) belongs to a particular institution for the purpose of making the appropriate decision about his opinion of the degree of relationship between this information and the rules that should be followed by the institution in order to reach a final decision on such information.
The internal audit is based on the following points:
– Examination: It means to ensure the correctness and integrity of the measurement of operations that are recorded, analyzed, and classified. For example; the examination of accounting measurement of financial operations related to a specific activity of the institution.
Verification: The possibility of judging the validity of financial statements, as a mark of the organization’s business for a certain financial period, and indicator of financial position at the end of the period.
Report: Classify the results of the examination and inquiry and prove them in a report submitted to those concerned inside and outside the institution. It is the conclusion of the audit process where the auditor gives his opinion on the financial statements as a whole, in terms of their portrayal of the center of the financial institution and the statement of its operations properly and meaningfully.
The importance of internal audit
The audit serves many stakeholders inside and outside the institution. The auditing process must serve many groups that find an interest in recognizing the validity of the financial position of the organization.
Parties involved in the importance of auditing are:
– Management of the facility: Audit is important for project management. Depending on management in the planning process, current and future decision-making and oversight makes the work of the auditor very incentive to do these tasks. The audit of financial statements leads to directing investment to such an institution.
– Banks: Commercial and industrial banks depend on financial statements audited by a neutral technical body when examining the financial centers of projects that apply for loans and credit facilities from them. The economists also depend on these lists when assessing the national income and economic planning.
– Investors: The emergence of large companies, factories and the distribution of their capital to large numbers of shareholders have shown a need to appoint a legal auditor, so investors are assured that their money will not be embezzled and stolen as a result of the auditor monitoring the actions of the company’s management and the company’s basic contract and corporate law are not violated.
– Government agencies: They depend on audited financial statements for many purposes such as control and planning, taxation, and granting of loans. Legal institutions rely on financial statements if a dispute happens between the institution and any other party.
The integrity of the internal audit application
Internal audit is the focus of the control structure over the physical protection of assets, ensuring the integrity of financial statements, encouraging compliance with financial and administrative policies, and raising operational efficiency. It is an important mean to manage institutions, ensure and verify the commitment of administrative units to financial and administrative policies, and the general policies.
Many training courses in monitoring and developing the internal audit function help internal auditors to acquire sufficient knowledge of the profession standards and establish and maintain a sound system of internal audit. The legal obligation of the institution is to ensure the integrity of its application, It has to hold regular accounts, as well as the practical necessity of such a system for the institution is to perform its work properly and efficiently.
Internal audit is an effective tool for reducing current and anticipated economic risks. The task of an internal auditor is essential in risk management decision-making at the right time, particularly strategic and operational decisions.
The management of the institution seeks to predict and manage risks of all kinds because it is fully aware of the impact of these risks on the objectives of the organization. It also works on the use of these tools and methods to address these risks. One of the most important methods is internal audit.