Internal Audit and the inevitable development
Internal Audit and the inevitable development
Worldwide, internal audit has a long life but only after the development of financial fraud at WorldCom and Enron Corporation (USA) the years 2000-2001, and especially as the U.S. Sarbanes-Oxley born in 2002. This Law regulates companies listed on U.S. stock markets to report on the effectiveness of internal control systems company.
While the activities of the independent audit limited to the examination of financial statements (the level of honest and reasonable), the operation of the internal audit is not limited to any extent in the company, from purchasing, manufacturing, sales to financial management, personnel or information technology. The purpose of internal audit is for the management of enterprises, not for external partners. Internal Audit reviews not only the weakness of the management system but also assess the risks both within and outside the company.
The benefits of internal audit
Internal audit can bring many business benefits. These tools help identify and improve weaknesses in the system of enterprise management. Through this tool, the board of directors and the board can work better control, better manage risk and enhance achievement of business objectives. An enterprise internal audit will increase the confidence of shareholders and investors on the stock market system administrator here. The world statistics show that the company have regular internal audit reports on time, the financial statements are the level of transparency and precision, the possibility of fraud and ultimately lower production efficiency business than the companies without internal audit office.
However, there is the fact that the business will not see all of these benefits and take measures to realize these benefits. Many businesses pursue growth hot and did not balance the three objectives required of sustainable development. That growth, efficiency and control. The result was three goals of this triangle is not really expanding in all three corners of the growth process in a synchronous manner. Instead they have been distorted in the other two corners, but growth is achieved, but the efficiency and control to decrease or not on a par with the growth.
For sustainable development, any business will have to balance all three objectives. This is the real problem of governance. Enterprises that overlook one of the three goals they must pay the price sooner or later.
Actual internal audit in Vietnam
Currently the highest legal framework for the internal audit activity is the Enterprise Law (old and new). The first concept related to internal audit prescribed in the control law is elected by shareholders. However, the role, functions and responsibilities of the supervisory board is too vague, do the work of inspection extraordinary nature, as required rather than regularly.
The state enterprises have an extra provisions and guidance on internal audit issues (Decision 832/TC/QQD/CDKT 1997). Accordingly, internal audit office has reported to the CEO as part of the administration's general manager. This reduces the independence of internal audit office, because the whole system of business management (prescribed by the board of directors) are subject to review by internal audit. Meanwhile, according to common practice in the world, the internal audit office shall report directly to the supervisory board or the board, ie the higher level management.
In Vietnam, over the years, the control in the state-owned enterprises and some banks were not active but is effective because of the role, functions and responsibilities are unclear and lack of tools to performance monitoring.
In the other type of company, internal audit activities more or less formed when the company implemented a quality management system or the environment (ISO). The company has ISO certification required to perform an internal review (actually internal audit) at least once a year on the level of compliance with ISO standards. This assessment is usually caused by a ban or a part - often referred to as the ISO or the quality assurance - implementation and report to general manager. However, due to internal assessment is limited to compliance with ISO standards (mainly in terms of procedures and documents), making it almost does not help much to improve the control system at the company. In fact, many companies implement ISO has recognized this and have established internal audit departments at higher levels, fuller and more substantive.
In Vietnam, the construction of internal audit in the enterprise will inevitably develop in the future with strength development of Vietnam's securities market. The demand of investors for a professional system administrators will force businesses to pay attention to build a system of internal audit so that it effectively.
The trend established internal audit system will develop in the enterprise with foreign capital operating in Vietnam. These enterprises are increasingly contributing higher revenues and profits for the parent company abroad. And a lot of parent companies that are listed on the stock market in the U.S. or other major stock markets around the world. Thus, gradually, the foreign companies in Vietnam must comply with regulations such as Sarbanes-Oxley Act in the U.S., that is to perform internal audit. These companies will increasingly get the internal audit program implemented by the parent company or department will have to build an independent audit of their own.
How to build the internal audit department?
The construction of the internal audit department in the business to be done through several steps. First of all, the enterprise must determine the specific needs and specific purposes of this section. Next is to define clear organizational structure, roles, functions and powers of the internal audit department, which may include a document such as audit charter to ensure sufficient independence to internal audit department activities. The next equally important is the chief recruiting auditors, auditors and training them. One thing to note is that the internal audit profession by many independent audit and require qualified and highly experienced. Finally, the internal audit department should audit is the best pilot and the evaluation of an independent consulting firm, to draw experience before starting the strategy and audit plan long-term.
Internal audit is the assessment and internal consultant in the enterprise, independently and objectively, to deliver value and improve the management of the business through strengthening the internal control and management of risk. |
