What can internal audit support for building an effective corporate governance environment? Internal audit is a crucial component in the construction of an efficient corporate governance environment. However, it's important to understand that the primary responsibility for building and maintaining an effective corporate governance environment must come from the leadership of the organization, specifically the board of directors and executive management. Internal audit plays the role of an independent, objective monitor of operational processes and provides assessments of the corporate governance environment. This monitoring and assessment are supportive of the leadership in building and maintaining an effective corporate governance environment.
The Role of Internal Audit in Enterprises
According to Standard 2110 - Governance of The Institute of Internal Auditors (IIA), internal audit activities evaluate and make appropriate recommendations to improve governance processes, including processes for:
(1) Setting strategic directions and performance objectives;
(2) Monitoring risk management and control processes;
(3) Promoting values and ethics within the organization;
(4) Ensuring accountability for the efficient and effective use of organizational resources;
(5) Warning risk and control information to appropriate areas of the organization;
(6) Coordinating activities and communicating information among the board, external and internal auditors, and management.
How to maximize the effectiveness of internal audit for the enterprise?
Leadership within the organization can consider the following suggestions to maximize the effective use of the internal audit function in improving governance, control, and risk management processes:
Optimize the resources of internal audit as part of risk management and operational management. This can help identify and develop effective plans for managing critical risks that hinder the achievement of organizational goals.
Provide significant input to internal audit when developing the annual audit plan and making changes during the year to focus timely resources on significant risks.
Exchange and coordinate plans for internal audit to support compliance with legal requirements and regulations, both for internal audit in particular and for the organization in general.
Consider using the internal audit function as a management training program for the organization. Also, contemplate appointing temporary audit staff (employees from other departments) to the internal audit team for short periods to provide opportunities for learning and improving knowledge about the organization's activities, risks, controls, and governance.
Evaluate and discuss with internal audit to supplement the necessary human and skill resources.
Support and encourage the efforts and values of internal audit to enhance the role of internal audit, risk, and control throughout the organization.
Consider investing in and implementing technology (e.g., big data analytics) to support and optimize audit activities, saving time and effort in the audit process.