6 Important Roles of Internal Audit in Corporate Governance
Have you ever wondered how a strong corporate governance and internal audit relationship benefits your company? Routine internal audits improve a company's corporate governance. Corporate governance refers to how a corporation is governed or the technique by which companies are managed and directed. Corporate governance refers to how business should be carried out per the shareholders' desires and is conducted by a board of directors.
Internal audit assurance is done by assessing the effectiveness of governance, control processes and risk management. This helps an organization achieve set objectives. Here are the roles of interal audits in corporate governance.
Role of Internal Audit in Corporate Governance
1. Risk Evaluation
This involves identifying the processes in a company that carries significant risk. Many of these risks are financial in nature. However, this process needs to be carried out on the operations that influence a company's financial standing. With the rise of cyber-attacks, organizations must stay alert and ready if they experience this.
2. Track Company Asset Values
Company assets should be tracked often. Organizations task the internal auditors to keep the company assets register. Therefore, they adjust the value of the assets to reflect the impacts of inflation, appreciation and depreciation on their values. This information is essential as it affects the company's balance sheets and shareholders' interests.
3. Review Company Operations Performance
Internal auditors provide a global view of corporate performance and any financial issues. This is very vital when carrying out an analysis of whether the organization made a loss or profit. Such reviews show the effectiveness of the corporate governance process. It also helps to know where there are challenges and find an effective way to help solve these challenges.
4. Recommend policy action
Internal audit helps improve corporate governance by developing policy action recommendations. Spending more time investigating any lapses in corporate governance enables them to be efficient in ways a company can improve. Consequently, this helps improve the organizational structures geared towards efficient operations and profitability.
5. Analyze the Efficiency of the Corporate Governance Process
It's the role of an internal auditor to ensure efficiency of the corporate governance processes. The auditor analyses the entire financial system of the company. This makes it easy for them to tell how strong a corporate governance process is. In Australia, you can find a few accounting firms in Newcastle that are great at ensuring this process is successful, such as PKF.
6. Track Financial Irregularities and Fraud
Organizations face many fraudulent activities that have ended up being the downfall of once-great companies. Internal auditors help an organization track any financial irregularities and fraudulent activities.
Fraud occurs when people try to get dishonest gain. Financial irregularities are financial processes that are not in line with set policies. Internal audit helps in uncovering these schemes.
It's in a company's best interest to improve its governance now. Internal auditing of the effectiveness of the governance system requires a rigorous methodology and overview of the company. CEOs and business owners must understand that governance provides a clear direction for the journey.
Hence, internal audit roles and objectives need to be aligned with the organization's long-term interests. Strong company governance is part of success in a business strategy while enhancing a competitive edge.