CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Very large organization and some small ones have found a need for internal audit in addition to an external audit. Internal auditors are employee of the organization and work exclusively for the organization. Their functions partly overlap those of the external auditors and in parts are quite different. The precise function of external auditors are either laid down by statute or embodied in a letter of engagement. The functions are determined by management and vary greatly from organization to organization. Internal audit defined as an independent appraisal functions established by the management of an organization for the review of the internal control system as a service to the organization. It objectively examines, evaluate, and report on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources. A) Internal audit is thus: i. Having the scope to arrange his own priorities and activities. ii. Having unrestricted access to records, asset and personnel’s. iii. Internal audit personnel with an objective frame of mind set. iv. Freedom to report to higher management and where it exists to an audit committee. v. Internal audit personnel who have no conflicts of interest or any restriction placed upon their work by management. vi. Internal audit personnel have no responsibility for line work or for new system.
A person cannot be objective about some things he or she has taken responsibility for. On the other hand the internal audit should be consulted on new or revised system. vii. Internal audit personnel who have know non audit work. Since internal auditors employee is difficult to ensure that they are truly independent in mind and attitude. B) as a service to the organization, the organization, the management requires that: i. Its policies are fulfilled ii. The information is required to manage effectively and should be and complete. This information is not only that provided by the accounting system. iii. The organization assets are safe guard. iv. The internal control system is well designed. v. The internal control system work in practices.
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