As stated in the International Professional Practices Framework (IPPF) of The Institute of Internal Auditors, internal auditing is an independent, objective assurance and consulting activity aimed at improving an organization's operations.

This applies a systematic approach in assessing the effectiveness of the organization’s control, governance, and risk management systems (The Institute of Internal Auditors, n.d.).

An effective internal audit contributes to an organization's success, and this involves open communication between the internal auditors, audit committee, and the management.

Ensuring Effective Communication During the Audit Engagement

An open communication between each party involved is essential in executing the audit engagement effectively.

1. The management can cooperate with the auditor through providing all the necessary information needed for the audit process. This is necessary as any information that the management would refuse to disclose might limit the accomplishment of the desired audit objectives.

2. The audit committee may also take a proactive role in deciding the objectives and assessing the chief audit executive's work. This would help in monitoring the progress as processes are being executed. If there are any concerns that will arise during the engagement, it should be raised immediately.

Reporting and Disseminating Audit Findings

1. The internal audit findings should be communicated through an audit report that is clear, concise and objective.

It should provide all significant and relevant information that can be easily understood by the users. This should allow them to have a better understanding of the issues and determine how to resolve them.

2. The report should also be communicated in a manner that would avoid any possibility of misinterpretation. This can be achieved by avoiding too much jargon or technical terms.

3. The findings must also be disseminated to the users involved, most notably the senior management, in a timely manner.

This would help for corrective actions to be taken immediately and to maintain relevance of information for the conduct of business operations.

Audit Findings Needing Further Discussion

The auditor's report may also include other matters that should be further discussed with the audit committee. These include:

a. Disagreements regarding matters relevant to the financial statement and the audit report

The reasons for the disagreements should be thoroughly discussed. The issues determined by the auditor after obtaining additional facts and relevant information prior to the issuance of the audit report are not included.

b. Auditor's assessment and conclusions about the quality aspects of the company's accounting policies and practices

It should be emphasized whether the auditor finds biases in management's accounting judgments or financial statement disclosures.

Responding to Audit Findings

The manager should provide a written response to the internal audit findings. The response should include the management's clear and concise plan for correcting or resolving the issue found. Specific actions must be indicated, together with an attainable timetable for implementation.

With this, the internal auditor would be able to ascertain that the management took corrective action in response to engagement observations and recommendations, and that the measures taken promptly addressed the identified issues.

Ensuring Auditor’s Compliance with the Code of Ethics

In every audit engagement, it is essential for auditors to comply with the Code of Ethics, which establishes the principles of conduct governing the actions of auditors and organizations when conducting internal audits (The Institute of Internal Auditors, n.d.). This should be considered as the most important part when conducting the audit.

An auditor who acts with integrity would be able to keep away from the temptations of publishing an erroneous report and intentionally submitting false working papers. The principles of honesty, fairness, and truthfulness will be exercised in all aspects of the auditing process.

Furthermore, adhering to the principle of confidentiality involves the responsibility to protect the information received and to refrain from disclosing it without proper permission.

The auditor should also maintain independence to avoid any conflict of interest. Being independent ensures that the auditor remains objective, without being influenced by a conflict of interest.

Lastly, applying the principle of competency will increase the auditor's proficiency and the quality of work produced, allowing them to contribute more value to the organization for which they are auditing.

In Conclusion

Internal audits are a valuable tool for any organization. By promoting open communication, ensuring clear reporting, and upholding ethical standards, internal audits can drive positive change and contribute to a company's long-term success.

References:

The Institute of Internal Auditors (n.d.). Definition of Internal Audit. Retrieved from https://www.theiia.org/en/standards/what-are-the-standards/definition-of-internal-audit/

The Institute of Internal Auditors (n.d.). Introduction to the Code of Ethics. Retrieved from https://www.theiia.org/en/standards/what-are-the-standards/mandatory-guidance/code-of-ethics/