INTERNAL AND EXTERNAL AUDITING

INTERNAL AND EXTERNAL AUDITING

It is important for proper audit work to be done to ensure that the accounting information system and its procedure will serve as a basis for making the financial statement to present a true and fair view.

With that we shall discuss briefly the meaning of internal and external auditing and evaluate the effectiveness of internal control system in any organization. It is also an appraisal or monitoring activities established by the management to review the accounting and internal control system as a service to the entity.

The main function of internal audit to ensure that an organization corporate objective is being achieved.

Furthermore, the function of internal auditing can be specified in relation to:

1. Cooperate governance
2. Risk management
3. Organizational system

It is important to know the function of the internal audit in relation to the above.

Cooperate governance which is a system in which an organization is directed and control. It is the responsibility of the management and reasonable influence by the user’s of accounting information.

It should be noted that some of the requirement of the combined codes of cooperate governance provided that an entity should have a defined process of handling the effectiveness of internal control, consider key rise and how to manage them, consider the adequacy of monitoring and the action to remedy weakness.

The internal auditor function relations to this to ensure that the accounting information system and procedure are followed properly are:

1. It is important for the auditor to assess the adequacy of the effectiveness of the internal audit.
2. Evaluate the control system and reporting finding to the management.

RISK MANAGEMENT: It should be noted that all business or organization are faced with risk be it government or private firm. This risk will prevent an entity from applauding it cooperate objectives.

Therefore the internal audit function in relation to these are:

1. Evaluate the board of director risk management structure and policy
2. Identify and prioritize key risk
3. Make recommendation on how to handle risk to the management.

ORGANIZATION SYSTEM: It consist of the organizational structure in line with management responsibility and communication system. It is important for the auditor to evaluate the appropriateness of the organization system.

The internal auditing is the system that measure and evaluate the effectiveness of internal control audit to know their performance of their duties. The external auditor is an independent auditor that carry out investigation or examination of the financial statement as to know whether the financial statement is free from material mis-statement and to know whether the proceed are adopted in preparing the financial statement is in line with regulating frame work.

The external auditor is empowered to demand and obtain document and information that are deemed necessary for the purpose of their audit work.

In these respect, the external auditor will visit all zones, sector offices on quarterly audited account.