Internal Audit

Internal auditors work for the organisation, either as employees or as outsourced advisers, but they report independently, usually to the audit committee of the board, so they can give objective assessments.

Their work goes beyond the financial statements. Internal auditors may review whether purchasing procedures prevent fraud, whether IT systems are secure, whether the company complies with laws and regulations, and whether operations are efficient.

For example, an internal audit of a company's payments process might find that one employee can both set up new suppliers and approve payments to them, creating a fraud risk. The auditor would recommend separating these duties.

Internal audit differs from external audit. External auditors are independent firms that give a public opinion on the financial statements for shareholders. Internal auditors serve the organisation itself, helping management and the board strengthen controls and manage risks.

Many listed companies are required or expected to have an internal audit function. A strong internal audit can help catch problems early, before they turn into financial losses, regulatory penalties or damage to reputation.