Hardly a week goes by without news of a high-profile corporate collapse or fraud. The public must wonder: how could this happen?
The answer is simple: a lack of corporate governance. A key factor to any organization’s corporate governance is an effective and efficient internal audit function. It aims to address the following points:
Internal audits provide assurance that the internal control environment is operating effectively and efficiently and mitigates basic business risks.
Directors have a fiduciary responsibility to ensure an effective internal control environment. For nonexecutive directors, the internal audit conveys how the organization functions, and can emphasize areas of weakness.
Most importantly, internal audits allow for a new set of eyes to review the entire business process. This will improve efficiency and effectiveness, and potentially prevent significant amounts of time and money potentially spent for system improvements in the future. An internal audit promotes and inspires an organization to think about why they do things a certain way and if an alternative approach is more effective.
The importance of an internal audit from a governance perspective has mandated the disclosure of:
Despite corporate structure, business owners and directors should consider the following questions in respect of a company’s operations:
It’s usually unlikely for business owners and directors to be involved in the everyday operation of a business or to review all transactions. If owners and directors are too secluded from the operation to know the answer to these questions, then an internal audit can provide the assurance to satisfy their fiduciary responsibilities.
An effective internal audit function can play a crucial role in the governance of any organization and provide assurance that a company’s system is working as efficiently and effectively as possible. Contact Verdeja, De Armas & Trujillo, LLC today for more information.