Internal Audit

Internal Audit

Internal audit is an appraisal or monitoring activity designed by the management and directors for the review of the accounting and internal control systems as a service to the entity. It functions by, amongst other things, examining, evaluating and reporting to management and the directors on the adequacy and effectiveness of the components of accounting and internal control system.

Why needed:

Internal audit departments are normally a feature of larger organization. The need for internal audit will depend on:

• The scale, diversity and complexity of company’s activities
• The number of employees
• Cost benefit considerations
• Changes in organizational structures, reporting process or underlying information systems
• Changes in key risks
• Problems with internal control systems
• An increase no of unexplained or unacceptable events

Example: Cynthia Cooper who was the vice president internal audit dept. of World Com and discovering the fact that billions of dollars of operating costs had been capitalized turning a $662 million loss into a $2.4 million profit in 2001.