Associations can (and should) establish an internal audit function in an efficient, cost-effective way.
An internal audit is a key pillar of good governance. Governance refers to the processes and structures implemented by organisations to inform, direct, manage and monitor activities.
Internal audit work is risk-based and encompasses both financial and non-financial operations; it is not limited to money. For example, in a healthcare organisation, there may an important role to review clinical governance.
Internal auditing is an important element for assurance and a valuable tool to manage risk effectively. This applies to all organisations, including associations.
What does an internal audit do?
An internal audit provides the board of directors, audit committee, chief executive officer, senior executives and stakeholders with an independent view on whether an organisation has an appropriate risk and control environment, while acting as a catalyst for a strong risk and compliance culture.
The following questions are part of an effective internal audit:
- Is our organisation achieving our objectives?
- Are we complying with laws, regulations, policies and contracts?
- Are we ensuring that opportunities for fraud and corruption are limited?
- Are our decisions properly authorised?
- Are we ensuring improvements are implemented?
- Have we put measures in place to safeguard our assets?
- Are we efficient, effective, economic, ethical and sustainable?
- Are we constantly looking for better ways of doing things?
Internal auditing need not be costly
Establish an internal audit according to the size and requirements of your organisation by determining what should be audited, the resources required to do this, and how much budget is available. Depending on the size of the organisation, it could simply be a few days each quarter. We can help plan and execute your internal audit.
Benefits of an internal audit
The potential benefits of internal audit to an association are to:
- provide the governing body, usually the board, with assurance that matters are in order.
- highlight areas where controls may be weak and in need of tightening. Many associations rely on a small number of people, whether they be paid or volunteer, and it can be difficult to separate duties which can potentially lead to breakdown in controls and risk to the organisation.
- encourage trust in an association. Potential members and donors will generally avoid a poorly controlled association.
Internal auditing is a service function that provides key stakeholders with a range of risk-based activities to assess whether an organisation is operating satisfactorily.
An internal audit activity in an association can be cost-effectively implemented and provide significant benefits.
Edited from an article by Andrew Cox, Manager of Quality Services at the Institute of Internal Auditors–Australia