Does Internal Audit Provide Its Opinion?

Internal Audit Opinion:

Internal auditors normally issue their reports to related parties such as the auditee, audit committee, and board of directors. Internal audit normally does not provide the opinion like external audit, but it usually concludes what they found during the cause of internal audit.

For example, the significant internal control matters, non-compliance with internal policies and regulations. In general, the conclusion of the opinion of the internal audit is prepared mainly based on the scope of the internal audit and its objective.

Suppose auditors assign to review the internal control over inventories management of the entity, then at the end of their audit. In that case, they will raise all the internal control weaknesses and significant matters related to inventory management and their recommendation and implication.

Here is the quote of Internal audit Opinion based on Internal Audit Standard, Engagement OpinionThe rating, conclusion, and other description of results of an individual internal audit engagement, relating to those aspects within the objectives and scope of the engagement.

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Example:

For example, the internal audit department is assigned to conduct internal audit activities in the payroll department due to some concerns from the audit committee and board of directors.

Then, after the cause of its audit activities, the internal audit department needs to issue an audit report, maybe based on the entity’s structure, to the GM or Director and head of HR on the result of their audit.

This report should provide the conclusion of significant problems found and the rating of relevance control. The internal audit report also needs to communicate to the audit committee and board of directors.

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So, in conclusion, the internal audit did not issue the opinion like an external audit. Still, it also issued the audit report, which raises out all the findings, implications, and recommendations along with the audit rate. Audit rating is provided based on the nature of risks and subsequent risks that might affect.

Does internal audit review financial statements?

The scope of the internal audit includes financial audit, operational audit, compliant audit, fraud investigation, risks management review, and so on. In general, the annual audit coverage, which results from annual risks assessments, will determine whether internal audits cover the review of financial statements. If the risks are high and the internal auditor wants to address the risks, then an internal audit also reviews the financial statements. However, the report from the internal audit should be used for statutory compliant purposes.

What is a typical internal audit report?

A typical internal audit report is a document that presents the findings, conclusions, and recommendations of an internal audit. The internal auditors usually prepare the report after thoroughly reviewing the organization’s processes, operations, and systems.

The report typically includes the following sections:

  1. Executive Summary: This section briefly overviews the audit, highlighting the key findings and recommendations.
  2. Introduction: This section explains the purpose and scope of the audit, as well as the methodology used.
  3. Background: This section provides relevant information about the organization or process being audited.
  4. Findings: This section presents the audit findings, which may include observations, issues, or areas of improvement.
  5. Conclusions: This section summarizes the audit findings and provides conclusions based on those findings.
  6. Recommendations: This section provides recommendations for addressing the issues identified in the audit.
  7. Management Response: This section presents management’s response to the audit findings and recommendations.
  8. Appendix: This section includes supporting documentation, such as charts, graphs, and detailed analyses.
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Overall, the internal audit report is a crucial tool for organizations to identify areas of improvement, enhance their operations, and ensure compliance with relevant laws and regulations.

How Do You Write an Internal Audit Finding? 

An internal audit finding is a formal written report that documents the results of an internal audit. 

It identifies areas of concern, such as weaknesses or deficiencies in an organization’s policies, procedures, or internal controls. 

The following are steps to write an internal audit finding:

  1. Clearly state the objective of the audit: Begin by stating the audit’s objective and the scope of the review.
  2. Identify the finding: Describe the issue identified during the audit. Be specific and clear, using evidence to support the finding.
  3. Evaluate the impact: Determine the potential impact of the finding on the organization. Consider financial, operational, and reputational risks.
  4. Determine the root cause: Analyze the underlying cause of the finding. Identify the source of the issue and any contributing factors.
  5. Recommend corrective action: Provide recommendations for corrective action. The corrective action should address the root cause and mitigate the risk to the organization.
  6. Assign responsibility: Clearly identify the person or department responsible for implementing the corrective action.
  7. Establish a timeline: Set a timeline for completing the corrective action.
  8. Include management response: Allow management to respond to the finding and recommendations. Their response should include an action plan and timeline.
  9. Finalize the report: Once the finding is documented, ensure the report is complete and accurate.
  10. Monitor progress: Track progress and follow-up on corrective actions to ensure they have been completed effectively.
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