Internal Audit Department is the independent department or non-operation department in the organization sets up by the board of directors and audit committee to perform internal audit services in the company.
It is part of the company risk management since part of the internal auditor’s responsibility is also to assess how the risks of the company are assessed and managed by the company.
The internal audit department is setting up to perform the internal audit activities which is not only required by the board of directors or the management of the company but also as required by the local law and regulator’s requirement.
This department is running by the chief of internal audit or sometimes run by the head of the internal audit department of the organization structure and boards’ decision.
Check here if you want to know more about what is an audit?
In this article, we will discuss the key rule and responsibilities of internal audit duction or department
1) Administrative works
Even though the internal audit department is an independent department and not involved with the operation, yet the employee working in this department still an employee of the entity.
Therefore, there are some works and reports that this department reporting to executive departments like Finance, HR, or Admin.
The staff performance of this department is sometimes reporting executive departments and sometimes does not in order to avoid conflict of interest and breach of independence.
2) Main reporting line
Based on INTERNATIONAL STANDARDS FOR THE PROFESSIONAL PRACTICE OF INTERNAL AUDITING (STANDARDS), the Internal Audit Department should under the control of the audit committee and the Board of Directors.
The reason that we call this department as the non-operation department is because of the standard and best practices, to ensure the quality of works and objective, require this department to separate independence from the operational activities of the organization.
The main objective behind putting Internal Audit Department outside maintaining the Internal Audit Department to be independent because they want to ensure that all the judgment and works done by them stay independent and objective.
Let me tell you why is it’s important to keep its independence. For example, the internal audit involves in the operation and their bonus is based on the company performance, then there will be a risk to the organization. The risk is that, for example, the is a sales transaction or decision