CHAPTER ONE
INTRODUCTION
Internal audit is an independent appraisal function established by the management of an organisation for the review of the internal control system as a service to the organisation. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution to the proper, economic and effective use of resources The essentials for effective internal auditing are: independence;The internal auditor should have the independence in terms of organisational status and personal objectivity which permits the proper performance of his duties staffing and training The internal audit unit should be appropriately stated in terms of numbers, grades, qualifications and experience, having regard to its responsibilities and objectives. The internal auditor should be properly trained to fulfill all his responsibilities .relationships;The internal auditor should seek to foster constructive working relationship and mutual understanding with management, with external auditors, with any other review agencies and, where one exist, the audit committee ;due care;The internal auditor should exercise due care in fulfilling his responsibilities .planning, controlling and recording. The internal auditor should adequately plan, control and record his work .evaluation of the internal control system;The internal auditor should identify and evaluate the organisation’s internal control system as a basis for reporting upon its adequacy and effectiveness .evidence;
The internal auditor should obtain sufficient, relevant and reliable evidence on which to base reasonable conclusions and recommendations.reporting and followup;The internal auditor should ensure that findings, conclusions and recommendations arising from each internal audit assignment are communicated promptly to the appropriate level of management and he should actively seek a response. He should ensure that arrangements are made to follow up audit recommendations to monitor what action has been taken on them .The terms of reference for the internal audit function should be formally confirmed by the organisation and should have proper regard to the contents of this guideline; demonstrable independence of the function is crucial to its effectiveness. For certain public sector organisations the need for an internal auditing function is prescribed by statute and this provides a basis for defining specific standards and guidance for the practice of internal auditing in these organisations.To achieve full effectiveness the scope of the internal audit function should provide an unrestricted range of coverage of the organisation’s operations, and the internal auditor should have sufficient authority to allow him access to such records, assets and personnel as are necessary for proper fulfillment of his responsibilities.
It is a management responsibility to determine the extent of internal control in the organisation’s systems which should not depend on internal audit as a substitute for effective controls. Internal audit, as a service to the organisation, contributes to internal control by examining, evaluating and reporting to management on its adequacy and effectiveness. Internal audit activity may lead to the strengthening of internal control as a result of management response.One of the objectives of internal auditing is to assist management in the pursuit of value for money. This is achieved through economic, efficient and effective use of resources. It is a management responsibility to maintain the internal control system and to ensure that the organisation’s resources are properly applied in the manner and on the activities intended. This includes responsibility for the prevention and detection of fraud and other illegal acts. The internal auditor should have regard to the possibility of such malpractice and should seek to identify serious defects in internal control which might permit the occurrence of such an event. An internal auditor who discovers evidence of, or suspects malpractice should report firm evidence, or reasonable suspicions to the appropriate level of management