Best Advice on Establishing an inside Audit Department

Internal audit has increasingly gained ground recently and firms have realized it extremely helpful to keep check of systems and operations, predicting risks and providing recommendations in which there are weaknesses. An entity may prefer to fully outsource, co-source internal audit services or establish an on-site assurance department.

As a result of nature of internal auditing along with the company information that the auditors will acquire, many businesses prefer owning an in house team with occasional outsourcing of experts in specific areas.

Developing an assurance department is an exercise that should be carefully carried out to ensure efficiency and acceptability from the department by other stakeholders. Often managers and quite often the complete workforce of your entity may create a general dislike for the audit team where in these circumstances an in house team will not be effective.

If however keeping critical company information under lock and key in addition to full implementation of recommendations is an entity's priority, an internal audit department could be a powerful agent of alteration of an organization.

The way wherein the department is placed and the process wherein the team carries its tasks is most critical. Here are key steps which can be taken up ensure an effective setup of the internal audit department:

1. Obtain and discuss expectations with senior management, the board and audit committee, including required listing standards for listed companies. Non-listed organizations should look into voluntary compliance.

2. Develop an audit charter and possess it discussed and licensed by the audit committee.

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3. Design a proper budget and staffing model (e.g., in-house, co-sourced or outsourced). Moreover review what companies within your industry are accomplishing while considering company preferences.

4. Formulate reporting lines and responsibilities in the internal audit function.

5. Identify the auditable areas within the organization.

6. Conduct a primary risk assessment with company management and audit committee involvement. You could possibly consider COSO enterprise risk management (ERM) framework.

7. Consider the necessity to comply with various statutory requirements inside your environment as an example compliance with Sarbanes-Oxley Act for companies in the us.

8. Develop an inside audit plan responsive for the risk assessment.

9. Design staffing requirements and whether the department will likely be staffed internally, co-sourced or outsourced.

10. Plan and execute audit work called for inside the audit plan, including a system to check and followup on audit recommendations.

11. Update the chance assessment for changing circumstances in the past year.

12. Continuously enhance and modify the internal audit function to fulfill changing needs of management along with the audit committee.

Once the department has become put in place your head should be sure that the objectives in the department are reviewed every so often based on the organizational changing needs and risk profile. Often the department will probably be guided from the risk assessment results to develop intervention policies. The head in the department can produce a danger assessment questionnaire that is given to all heads of auditable areas to examine their risk exposures every once in awhile.