Does Internal Audit Provide Audit Opinion?
Internal auditors issue reports to related parties such as the audit committee and board of directors. Internal audit is the internal part of an organization that checks on its own procedures and performance to ensure everything is running smoothly. It normally does not offer opinions like external audits, but it usually concludes what they found during their investigation process.
Internal audit is the process of assessing, examining, and evaluating internal control in their own company. Internal Audits provide an in-depth view of the business operations to help identify potential risks of fraud or error.
Internal controls are a very important part of running an organization. They protect against mismanagement, fraud, and other problems that can arise during business operations. internal control must be followed by all employees in order to ensure compliance with both local laws as well any international standards set out by the company.
Internal auditor is the party that performs internal control testing to ensure the effectiveness in detecting and preventing risk. They must ensure that all relevant parties are following the same internal controls prepared by the company.
Does Internal Audit provide audit opinion?
Internal audit is required by the management, audit committee and board of directors to provide an audit opinion on the effectiveness of internal control, governance, and risk management. Internal auditors are also required to make a conclusion on the subject material which is specially assigned by the board of directors. This type of work may involve the investigation of fraud or error.
This opinion is different from the external audit opinion. The external auditors review the company’s financial statements and provide opinions if the reports are true and fair. They help to ensure that company’s financial statements are reliable and free from material misstatements. The external stakeholders and public can rely on the external auditor’s opinion and use the financial statement for any purpose.
Internal auditors are the company’s staffs who work for the company. They are reported to the audit committee and act independently of the management. Internal auditors work for the audit committee which has power over the management team. However, they are not really independent in the eye of external stakeholders. They are still part of the company, so it is very hard to prove their independence from the public perspective.
Internal audits focus on the effectiveness of company internal control. They access if the control can prevent and detect the risk of error or fraud. At the same time, they access the company’s compliance with all laws and regulations. Any noncompliance with such regulations will lead to a serious subsequent.
Besides the opinion issue on the routine work mentioned above, the internal auditor is also responsible to make conclusions on the special investigation assigned by the audit committee or board of directors. There is a fraud case that requires investigation from the internal audit. In the end, they require to make a conclusion on the case assigned by the board.
Example of Internal Audit Work
Internal auditor reviews the sale process and internal control performs by sales and accounting departments. They review the process the sale team receive sale order and pass information to the production team. Then the order will notify the delivered team after production is complete. They want to ensure that all customer’s orders will be processed and delivered. There are no orders are left behind and require more than the standard order times.
After delivery, the sales team has to issue an invoice to the customer. The issued invoice must base on the correct information on the delivered slip and selling price. After that, the information must send to the accounting department. Accountants need to record stock out, cost of goods sold, account receivable, and sale revenue.
Internal auditors have to review all these steps to ensure that the sale controls are designed to prevent and detect risk. Moreover, they have to ensure that all related departments follow the same control.