The Internal Audit Committee In The Company Accounting Essay

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For the internal audit nowadays, there are many things to be done by the internal audit committee in the company. They play a significant role in the company in order to provide a true and fair view of the company. The Institute of Internal Auditors ("IIA") states that internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes." In nowadays society, the internal auditing mainly focuses on risk assessment and gives reasonable assurances to the company so that the company can achieve their goal easily. They also need to provide some efficient and effective manner to improve the organization operation strategy. They also need to report the operation deficiencies of the company as well as risk management issue. Risk management nowadays are very important as we know there are three type of risk which are inherit risk, detection risk and control risk. Due the high risk for carelessness of accountant, it may cause the accountant to misleading the CEO about their financial situation of the company. Internal auditing also engages in continuous education and staff development and provides support to the company's anti-fraud programs.

As we know that the internal audit committee must be independence so they very clear what is their stand and the barrier that they cannot exceed so it build up strong mind set of the not to commit fraud in any ways. If an internal auditor involve in fraud, the company account will not be true and fair. It eventually spoilt the image of the company. This let the investor do not want to invest in the company. This will create a great loss to the company. There is a lot of hardship that faced by our internal auditor as such that the harness of data analytics and use data in the planning process to structure audits that add real value. Moreover, it become more risk focused for when should they use the analytics and which is really important to the company. Auditors provide less value on deposit investment that design to collect, extract and analyze data. Another major problem that face by the company and internal auditors is they need to adopt in a dramatically fast manner to the new regulatory environment. According to U.S auditor regulations, there are many industries like banking insurances and mortgages industries had applied to the new regulation. Internal audit committee are part of good cooperate governance as they help to oversee the financial reporting to assess the appropriateness and relevancy of accounting policies and disclosures in compliance with approved accounting standards. Internal audit committees help the government to provide a trustable view to the investor as they are people that taking care both internal and external process in the company. It shows that they are more reliable in the term of every aspect.

Recommendation

Consideration of whether or not there is a system of adequate internal controls should be second nature to any internal auditor. The considerations are much the same as they would be in any other auditable area: separation of duties, access limitations, second review processes and proper documentation of review and approval. Another consideration would be whether the controls are manual or automated. Where internal controls are manual, internal auditors need to inspect whether the controls are addressing the requirements of the organization. On the other hand where they are automated, the internal auditors need to confirm that the workforce understands the technology

  Furthermore, it is important to consider the credibility, qualifications, and experience of key personnel who have been assigned the critical tasks so internal auditors of Top Glove should be charged with the responsibility of assuring the board of directors that management, financial systems, and processes are working effectively. In all other matters, the CEO represents management to the board of directors. However, in Top Glove, the CEO belongs to the group that is being audited, so it is important for the internal auditors to have direct reporting channels to the board. The audit should examine the plan these individuals have developed for directing the company's Compliance effort. This plan should be updated on regular basis, should set forth the goals of compliance and its tactics, including monitoring, training, policy and procedure review and updating, for realizing these goals. In addition, the requirements of key personnel need to be competent and trustworthy, with clearly established lines of authority and responsibility documented in written job descriptions and procedures manuals. Organizational charts provide a visual presentation of lines of authority and periodic updates of job descriptions ensures that employees are aware of the duties they are expected to perform. By appointing an internal auditor is crucial to a company as internal auditor is responsible for overseeing all the financial records for his or her organization. The purpose of employing an internal auditor is to catch any accounting irregularities. The process of ensuring the integrity of the accounting and finance records within an organization is referred to as internal control. Essentially, the internal auditor is the gatekeeper of internal control measures, because he or she is usually the one performing checks on the system. Internal auditing should not be restricted to financial transaction only. Internal auditors also can equally assist management by ensuring that adequate financial and management controls have been implemented and are operating effectively or by identifying the weaknesses in such system and making recommendations toward their improvement which include among the others with internal audit, errors are more likely to be discovered in their early stages. Existence of assets is verified so as to protect the assets of the organization, errors in account can be corrected early once detected by the internal auditor, it acts as moral influence on the staff and promotes efficiency by compelling the officers to keep their books of account entered up to date, a detailed examination of the financial account submitted by contractors is facilitated, cash disbursement, such as for wages and salaries, may be checked before they are cashed.

Segregation of duties reduces the likelihood of errors and irregularities. An individual is not to have responsibility for more than one of the three transaction components which are authorization, custody, and record keeping. When the work of one employee is checked by another, and when the responsibility for custody for assets is separate from the responsibility for maintaining the records relating to those assets, there is appropriate segregation of duties. This helps detect errors in a timely manner and deter improper activities; and at the same time, it should be devised to improve operational efficiency and allow better and effective communications. In other words, segregation of different duties by Top Glove management is able to ensure that no one person is solely responsible for the entire process end to end, without effective checks and balances. For example, key authorization processes should have appropriate checks and balances. The person, who documents the transaction, should not be the same person who conducts the transaction. These simple checks and balances ensure effective controls and reduce organizational error rates.

Documentation and Record Retention is to provide reasonable assurance that all information and transactions of value are accurately recorded and retained. Top Glove can ensure records are maintained and controlled in accordance with the established retention period and properly disposed of in accordance with established procedures. Other than that, they must identify important and relevant information and communicate by using them in a form and timeframe that enable people to carry out their responsibilities. The company can keep them updated on the information systems which produce reports, containing operational, financial and compliance-related information that make it possible to run and control the business. They deal not only with internally generated data, but also information about external events, activities and conditions necessary to informed business decision-making and external reporting. Effective communication also must occur in a broader sense, flowing down, across and up the organization. All personnel must receive a clear message from top management that control responsibilities must be taken seriously. They must understand their own role in the internal control system, as well as how individual activities relate to the work of others. They must have a means of communicating significant information upstream. There also needs to be effective communication with external parties, such as customers, suppliers, regulators and shareholders.

Further areas for improvement identified during the course of the statutory audit by the external auditors are brought to the attention of the Audit Committee through management letters, or discussed at Audit Committee meetings. The key processes that the Group has established in reviewing the adequacy and integrity of the Group's system of internal control include the following:

1) Company's Policies and Procedures, which set out guidelines and the expected standards for the Group's operations are under regular review and update so as to maintain its effectiveness at all times.

2) Periodical and/or annual budgeting and target setting and review system for every operation of the Group. Analysis, data comparison and reporting of variances against targets are presented in the Group's various management meetings, which provide the framework for monitoring and controlling mechanism.

3) Submission of regular, timely and comprehensive flow of information/ reports to the Board and management on all aspects of the Group's operations to facilitate the monitoring of performance against strategic plans.

4) Clearly defined organisation structure of the various departments with defined delegation of responsibilities and accountability. Setting out the decision that needs to be taken and the appropriate approving authority at various levels of the management including matters that requires Board's approval.

5) Setting up monetary limits to the various level of delegated authority in order to minimise the risks of unauthorized transactions.

6) Regular internal audit visits by the Company's Internal Audit Department to assess and provide independent reports and assurance on the state of the internal control system of the Group's various operations.

7) Continuous training and development programmes covering all level of the Group's employees to ensure and to maintain the competency and efficiency of the employees.

8) Undertakes the compliance review functions to ensure adherence to rules and regulations laid down by the various regulators and authorities.

9) Continue to enhance the control and monitor the worker's permit renewal via the human resources management computer system and work closely with Foreign Workers Medical Examination Monitoring Agency on the medical check up of our foreign workers.

The Board is dedicated towards operating a sound system of internal control and therefore recognised that the system must continuously evolve to support the business and the size of the Group.

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