Internal audit is an appraisal or monitoring activity established by management for the review of accounting and internal control systems as a service to the entity. It examines, evaluates and reports to management on the adequacy and effectiveness of the systems.
Other activities include:-
a) Review of the accounting and internal control systems. Management is responsible for establishing an internal control system. These systems demand proper attention and continuous review, a function that is usually assigned to internal audit. The internal audit function designs a work plan that shows the areas and control procedures that will be reviewed during the year.
b) Carrying out examination of financial and operating information. This may include detailed testing of transactions and accounting and operating procedures.
c) Review of the economy, efficiency and effectiveness of operations including non- financial controls of an entity.
d) Review of the entity‘s compliance with laws and regulations. The internal audit function reviews whether the company has put in place appropriate procedures to ensure that all the relevant laws and regulations are adhered to. This will include review of adherence to laws such as taxation legislation, stock exchange listing regulations among others.
e) Review of the entity‘s compliance with management policies and other internal requirements
f) Carrying out independent investigations into the affairs of the company as required by management. The internal audit function will carry out investigations e.g. where frauds are suspected, where there is suspected inefficiency in the use of the company resources e.t.c