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Best Practices for Internal Audit in Government Departments

Author: K Rameesh
Date: 2003
Size: 15 pages (318 KB)

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Summary

Traditionally, internal audit has been seen narrowly as an activity of self imposed internal checks. However, the concept has undergone a sea change with regard to its definition and scope. How can best practice be expanded outside the financial sphere? How can internal audits exist as independent functions within organisations? This paper from from the Centre for Good Governance in Hyderabad India, suggests that the concept of the audit should be greatly expanded outside the financial realm.

Modern approaches view internal audits as including issues of cost benefit analysis, resource utilisation and their deployment, matters of propriety and the effectiveness of management. Furthermore, the internal audit must function independently within an organisation to place greater emphasis on objectivity. Hence, assurance and consultancy are two key roles for internal audits to fulfil.

An effective internal audit system leads to improved accountability, ethical and professional practices, effective risk management, improves quality of output and supports decision making and performance tracking. Successful internal audit transformations require the following key best practices:

• Good planning at strategic and tactical levels.
• Project management techniques to ensure that plans are achieved.
• Change management techniques to facilitate change, improve communications and facilitate stakeholder buy-in.
• Dedicated staffing for the transformation initiative.
• Internal audit to act as facilitator within the process of management decision-making. For instance, management should identify risks and strategies for avoidance in consultation with internal audit.
• Auditors should abide by the existing code of ethics which stresses integrity, objectivity, competency, confidentiality and independence.

Using best practices, internal audit functions can significantly enhance the probability of a successful transformation and many of the tools used in this approach have applications that go beyond the transformation process to enhance basic internal audit strategies. Internal auditors have special responsibility since no precise guidelines exist for best practices in governance, suggested policy pointers to achieve this include:

• Identifying forces that impact on governance. Auditors should fine tune knowledge of influences and provide management with regular updates for risk-aversion strategies.
• Flexibility and adaptability. Internal auditors must be creative and aggressive whilst seeking strategies to add value, safeguard assets and promote effective governance.
• Making management and organisational objectives the focus of internal auditing practice, fully integrated within the organisation.
• Review operations and programmes to ascertain whether results are consistent with goals and objectives, and ensure systems are compliant with procedures, laws and regulations.
• Evaluation must be on-going throughout the audit. There must be proper segregation of functional responsibilities, a system of authorisation and sound practice in performance of duties.
• Documentation of procedures should occur and evidence must be provided to back up opinions. Working papers should be drawn up and the work of an auditor assessed, ideally peer reviewed.

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Source: Rameesh, K., 2003, ‘Best Practices for Internal Audit in Government Departments’ Working Paper 10, Centre for Good Governance, Hyderabad
Author: Centre for Good Governance, Andhra Pradesh, http://www.cgg.gov.in