Businesses in contemporary economies fail because of inadequate internal control. Internal control comprises of all net processes initiated by an organization’s management, board of directors and other personnel that is geared towards providing reasonable achievement of the firm’s goals and objectives. Internal controls make up the primary defensive function in fraud and violations of laws, regulations and provisions of contracts and agreements. When a company has a performing internal control, it enjoys:
• Protected assets and lower risk of fraud
• Efficient operations
• Ample compliance with laws and regulations
• Financial integrity and reliability
A firm should have a clearly defined system of internal control and an even clearer established chain of command. The management of a company should be the heaviest burden of internal control. Though oversight boards often have the final say in matters pertaining to company welfare, they only play oversight roles and have no real control over how things are run. They may only convene to dissolve management in case of a collapse in internal control or to applaud the management in cases of efficiency in internal control.
An auditor is a trained official who performs the function of verifying the accuracy of business transactions and consequent records. They weigh financial procedures and make sure those companies and likewise entities are run competently. Their work is to trail cash flows of organizations from the very start to the end. They affirm that an organization’s funds are accounted for properly.
Internal auditors assess the risks in a firm’s internal control and their potential impact on the firms. They evaluate controls and suggest policies that need implementation by the institution to mitigate those risks. They are different from external auditors because their activities are geared towards helping improve internal controls of a firm. External auditors probe into a firm and present their findings and opinions to shareholders or statutory bodies. They do not care what consequence their findings have on the company, unlike internal audits which are conducted solely for the purpose of bettering management and mitigating risks of malpractice.
Most external auditors are contracted from accounting firms. Accounting firms have since the year 2013 been hiring chartered accountants to perform very many functions. A Chartered accountant can literary act as a Public Accountant in numerous countries. They seem to be winning a majority of elite internal and external audit jobs since the Chartered Accountants Program was launched in 2013.