Business Sustainability, Corporate Governance, and Organizational Ethics

CHAPTER 18Internal Auditing Function

1. Introduction

Internal auditing has evolved from a traditional appraisal activity to becoming an integral component of corporate governance in providing an objective, assurance, and consulting activity in the areas of strategic planning, internal control, risk assessment, and corporate governance. Internal auditing is viewed as a value-added service that improves the organization’s strategic plans, operations, risk management, internal controls, and financial reporting. Internal auditors’ roles changed from merely providing input and objective feedback to management, to directly participating in corporate governance, assisting the board of directors and thus, in the decision-making function. Recent corporate governance reforms encourage and enable public companies to establish in-house internal audit functions as an integral component of their corporate governance to assist the audit committee and the board of directors to carry out their oversight function. The chief audit executive (CAE) is primarily responsible for supervising, managing, directing, and overseeing the internal audit function. The company’s audit committee is directly responsible for hiring, compensating, firing, and overseeing the work of the CAE. This chapter discusses the role of internal auditors in corporate governance and the value-adding services of internal auditors to their organizations.

Learning Objectives

• Understand the importance and value-added nature ...