An Introduction to Internal Auditing

Those who use or pay for public services, either through taxation or charges, have a reasonable expectation that those public bodies make the best use of the resources at their disposal. Therefore, there is a public responsibility on such bodies to put the necessary mechanisms in place to ensure accountability. One such mechanism or tool is internal audit.

A definition of internal audit is: "An independent objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by providing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes"

Although the process of internal audit would differ from public body to public body, basically there are three types of internal audit processes:

Regularity or compliance audit: This type of audit is responsible for the evaluation of the adequacy and effectiveness of controls which are necessary to ensure • Reliability and integrity of financial and operational information, • Effectiveness and efficiency of operations, • Safeguarding of assets, • Compliance with laws, regulations and contracts. In essence it is to test compliance and effectiveness of controls.

Performance audit: Performance audit entails examinations of the economy, efficiency and effectiveness in the use of public resources, including the evaluation of service quality and the measurement of performance. Economy means minimizing the cost of resources acquired or used, bearing in mind the quality. Efficiency covers the relationship between the output of goods or services and the resources used to produce them. Effectiveness covers the relationship between the intended and actual results of projects and programmes. In essence it is to test for economic, effective and efficient procurement and utilization of assets.