Internal Audit - Myths And Facts

The role of Internal Audit has been changed significantly in the last few decades. When the system was manual then internal audits performance was assessed on errors/mistakes detected in the audit process. Now after the IT boom, many computations have been shifted to systems. Now posting errors are things of the past even new accountants might not be knowing about it. There was a day when accountants used to get peace when they get the trial balance tallied. Now in technologically advanced companies Balance Sheet is available with a single click.

After ENRON and other scandals, its role has been widened in terms of new COSO & SOX provisions. In India, too listing agreements are following the same roots. Now Internal Auditors are objectively assessing a company's IT and/or business processes. Assess the company's risks and the efficacy of its risk management efforts. Ensure that the organization is complying with relevant laws and statutes. Evaluate internal control and make recommendations on how to improve. Now let's discuss some myths about audits initially specified by Richard Chambers-

Myth- 1 - Internal auditors are accountants by training

The first misconception about internal auditing is that it is the work of Accountants only. Internal Auditors work in the area of fraud risks, compliance issues, and a number of operational issues that are not related to accounting, and the auditors’ backgrounds are likely to be as diverse as the operations they audit. A recent survey by The IIA’s Audit Executive Center indicates that audit executives are now recruiting job applicants with analytical/critical thinking ability, data mining skills, business acumen, and IT skills more often than they seek applicants with accounting training.

Myth- 2- Auditors are fault-finders and work on tiny errors

This is another joke about internal auditors that they are masters in arriving at tiny errors which casts the reputation of staff. In reality, auditors focus on major risks rather than on tiny errors since Audit resources are limited, and when auditors focus too much attention on minor issues, they are limiting the time available for addressing the major risks and controls that are at the heart of internal audit.

Myth-3- Don’t tell Auditors Anything unless they ask

This is a very dangerous situation. So we need to understand that Internal Auditors works on the process, not on persons. If there is any errs in the process/ system, then it needs to be informed to auditors actively so that he need not spend much time in a similar process. It will add value to the overall process. 

Myth- 4- Internal Auditors checks the same thing in the same way again and again

This is not correct, auditing standards require risk-based plans to determine priorities in audit plans and work accordingly. Some risks justify repeat audits too like regulatory compliances.

Myth-5- Internal audit is the corporate “police function.”

Once Lord Justice Topes said that “The auditor is a watchdog and not a bloodhound.” Best auditors always maintain rapport with audit customers. It all depends on the auditor’s behaviour. When their behaviour is righteous with clients they are treated as coaches.

Are any of the classic myths are true about you or your internal audit group? If so, it might be time to take a good look at what you are trying to accomplish and how you plan to reach your goals.

Friends Our profession's image is rapidly improving, but we have to work more to educate all stakeholders and enhance their understanding. It is not an easy task. You have to be selfless in this exercise. Internal Auditors role is like Doctor who wants well-being of their client, Doctor cures his client's disease, pain, etc. and suggests best lifestyle similarly auditor checks the health of process and suggests process improvement to strengthen the health of the organisation. So don’t worry just do your work and Leave rest on God.

Thank you