NCJ Number
67582
Journal
Internal Auditor Volume: 34 Issue: 4 Dated: (OCTOBER 1977) Pages: 19-24
Date Published
1977
Length
6 pages
Annotation
EXPANSION OF THE SCOPE AND INDEPENDENCE OF INTERNAL AUDITING IS DISCUSSED AS A MEANS OF IMPROVING THE THOROUGHNESS AND ACCURACY OF INTERNAL AUDITS.
Abstract
RECENT WELL-PUBLICIZED INSTANCES OF MANAGEMENT FRAUD AND ILLICIT COMPANY PAYMENTS HAVE BROUGHT ATTENTION TO THE ADEQUACY OF STANDARDS FOR INTERNAL AUDITING. ALTHOUGH THE IMPROVEMENT OF INTERNAL AUDITING PROCEDURES DOES NOT LIE IN GOVERNMENTAL RULEMAKING, THE FINANCIAL ACCOUNTING STANDARDS BOARD SHOULD CONTINUE TO SET ACCOUNTING RULES AND IMPROVE ITS EFFECTIVENESS. INTERNAL AUDITORS SHOULD HAVE SUFFICIENT MANDATES AND FUNDING TO CONDUCT THE PROCEDURES NECESSARY TO DETECT MANAGEMENT FRAUD AND ILLEGAL PAYMENTS. CERTAIN HIGH-RISK AREAS OF COMPANY OPERATIONS SHOULD BE SCRUTINIZED, SUCH AS SUDDEN CHANGES IN CONSULTANTS AT A TIME WHEN CHANGES ARE OCCURRING IN A FOREIGN GOVERNMENT, DRAMATIC CHANGES IN THE AMOUNTS PAID TO CONSULTANTS, DISCREPANCIES IN THE AMOUNTS PAID TO DIFFERENT CONSULTANTS PROVIDING ESSENTIALLY THE SAME SERVICES, UNUSUAL INVESTMENTS OR LOANS, THE SUDDEN WRITE-OFF OF A LOAN, FOREIGN SUBSIDIARIES WITH MINIMAL REVENUES OR ACCUMULATED DEFICITS, TRANSFERS OF LARGE CASH AMOUNTS TO SUBSIDIARIES AND THE SHIFTING OF ASSETS FOR TAX OR EXCHANGE CONTROL PURPOSES. A CHARTER SHOULD BE DEVELOPED FOR INTERNAL AUDITORS WHICH WOULD BRING UNIFORMITY TO THE INTERNAL AUDITOR'S ROLE. THEIR DUTIES INCLUDE A CONTINUOUS EVALUATION OF INTERNAL CONTROL SYSTEMS, AND THE INDEPENDENCE OF THE INTERNAL AUDITOR SHOULD ALSO BE ENSURED BY HAVING THE AUDITING DEPARTMENT REPORT DIRECTLY TO AN AUDITING COMMITTEE COMPOSED OF INDEPENDENT DIRECTORS, SOME OF WHOM HAVE ACCOUNTING BACKGROUNDS. COOPERATION BETWEEN INTERNAL AND EXTERNAL AUDITORS CAN ALSO DO MUCH TO IMPROVE INTERNAL ACCOUNTING PROCEDURES, AS WELL AS REDUCE OUTSIDE AUDITING FEES. (RCB)