Recently, I attended one of the workshops for Heads of County Executive Internal Auditors organized by the Public Sector Accounting Standards Board.
The core of the training was to upgrade the auditors’ skills in applying the international framework of professional practices in the counties. It appeared that the role of internal auditors in the public sector is essential.
The four pillars of good corporate governance are the board of directors (management), the internal auditors, the audit committee and the external auditors. Internal audit as a management tool is often referred to as the eyes and ears of management.
This crystallizes the importance of internal audit and highlights the need for its independence. In any organization, there are inherent risks that can ruin its reputation, corrode the trust of stakeholders or, at worst, bring the organization to its knees.
To manage these risks, the internal audit function plays a key role in assessing governance, risk management and internal control processes.
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve operations. It helps an organization achieve its objectives by taking a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes.
To be effective in their work, internal auditors must focus on governance, risk and control.
The internal audit unit and activity should be seen to demonstrate integrity, competence and professionalism. The process should be independent, objective and free from undue influence.
It must align with the strategies, objectives and risks of the organization.
In addition, it must demonstrate quality and continuous improvement, provide risk-based assurance, and promote organizational improvement. This is a big task that requires the internal auditor to be nimble in keeping abreast of issues that arise in their environment.
The role of internal auditors has in the past been misunderstood. Initially, the perception was that internal auditors should be accountants. While accounting knowledge is indeed essential, it is not the default designation for internal auditors.
Regulation 154 of the Public Financial Management (County Governments) Act 2015 requires internal auditors to comply with the International Professional Practices Framework as published from time to time by the Institute of Internal Auditors.
The regulation also directs auditors to follow policies and guidelines issued by the Public Sector Accounting Standards Board to ensure uniformity and consistency across the county government.
Regulation 153 requires the internal auditor to provide reasonable assurance through the audit committee on the state of risk management, control and governance within the organization.
For example, internal auditors must assess the adequacy of structures, which facilitate accountability to stakeholders through integrity, leadership, and transparency.
In a nutshell, internal auditors must be independent to successfully fulfill their function.
They must have unlimited access to the people, resources and data needed to be efficient and effective in their work.
In doing so, internal audit controls governance through the competent application of systematic and disciplined processes and knowledge. Internal auditors report their findings to the governing body to promote continuous improvement.