Internal Auditing in Enterprise-Wide Risk Management Report (Assessment)

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Introduction

The internal auditing panel is responsible for ensuring that all controls in an organization are working properly. All financial reports and statements must provide a true and fair account of the company (Gramling & Myers, 2006). In the current paper, the author will highlight the different roles of the internal auditor. The author will focus on what may happen if the internal auditor assumes or undertakes roles that do not belong to them. In addition, the situations under which the assessor may engage in duties beyond their specified boundaries will be reviewed.

Internal Auditing and Risk Management

The Legitimate and Core Roles of an Internal Auditor

Internal auditing is required to adhere to a set of rules and regulations. For example, as already indicated, the auditor should avoid carrying out duties that are not assigned to them. Many organizations are under pressure to identify the risks associated with their business activities. Some of these threats can be environmental, financial, operational, social, or even ethical. After identifying the risks, the management should devise ways to manage them (Beasley, Clune & Hermanson, 2005).

The work of the internal auditor is to detect these risks. They should also put in place measures to ensure that the threats do not harm the society in any way. The risks should also be evaluated. Effective monitoring must be carried out by the audit team to identify the chances of these threats taking place (Burnaby & Hass, 2009). It is also the duty of the internal auditor to ensure that time and other resources are effectively utilized to support the company’s leadership structure.

The in-house auditor is not responsible for making reports on the current condition of the firm. Qualification or disqualification of such reports is the role of the external inspector. It is noted that internal auditing is usually carried out by an employee of the institution. In most cases, the individual charged with this responsibility is the accountant. Segregation of duties is needed to avoid conflicts between internal and external auditors (Arena & Azzone, 2009).

The Likely Outcomes of a Scenario where Internal Auditors Carry out Duties that are not Assigned to them

The failure to carry out the specified duties on the part of the internal auditor may have significant impacts on the firm. Some of these consequences include the disruption of activities in the company due to conflicting roles. Another impact is the emergence of a weak internal control system. If the internal control system is weak, then the organization becomes vulnerable to risks (Beasley, Clune & Hermanson, 2006).

Using Auditing Standards to Deal with Situations where Internal Auditors Assume Roles that Affect their Objectivity

If internal auditing practices go against the set standards, then they should be changed (Fraser & Henry, 2007). According to the International Standards of Auditing, a weak internal assessment system should be eliminated. The independence and objectivity of the domestic auditor should not be compromised (Beasley et al., 2005).

Using Internal Auditing Standards to Determine whether In-House Assessment should Undertake Additional Engagements or not

There are several things that can make internal auditing to lose its objectivity. According to the aforementioned Internal Auditing Standards, the domestic auditor should avoid situations that may impair their impartiality. Social relationships and conflicts of interest should be avoided. An internal auditor is allowed to resign if they feel that their objectivity is impaired (Gramling & Myers, 2006).

Conclusion

The functions of the internal auditor should not be interfered with. Compromising these functions may lead to risks that can bring down the company. Segregation of duties between external and internal assessors should be enhanced. The situation promotes impartiality in financial reporting and risk management.

References

Arena, M., & Azzone, G. (2009). Identifying organizational drivers of internal audit effectiveness. International Journal of Auditing, 13(1), 43-60.

Beasley, M., Clune, R., & Hermanson, D. (2005). Enterprise risk management: An empirical analysis of factors associated with the extent of implementation. Journal of Accounting and Public Policy, 24(6), 521-531.

Beasley, M., Clune, R., & Hermanson, D. (2006). The impact of enterprise risk management on the internal audit function. Journal of Forensic Accounting, 1-20.

Burnaby, P., & Hass, S. (2009). Ten steps to enterprise-wide risk management. Corporate Governance, 9(5), 539-550.

Fraser, I., & Henry, W. (2007). Embedding risk management: Structures and approaches. Managerial Auditing Journal, 22(4), 392-409.

Gramling, A., & Myers, P. M. (2006) Internal auditing’s role in ERM. The Internal Auditor, 63(2), 52.

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IvyPanda. (2022, April 13). Internal Auditing in Enterprise-Wide Risk Management. https://ivypanda.com/essays/internal-auditing-in-enterprise-wide-risk-management/

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IvyPanda. 2022. "Internal Auditing in Enterprise-Wide Risk Management." April 13, 2022. https://ivypanda.com/essays/internal-auditing-in-enterprise-wide-risk-management/.

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IvyPanda. "Internal Auditing in Enterprise-Wide Risk Management." April 13, 2022. https://ivypanda.com/essays/internal-auditing-in-enterprise-wide-risk-management/.

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