Internal Audit
Executive Summary
Internal auditing is the cornerstone for having good governance at both municipal and state governments. The internal audit is an essential element of strong and effective state and municipal governments. The internal auditing assists in the foresight, insight, and oversight. In these public sectors, such as the governments, improved functioning is measured by the ability to deliver services and also carry out the programs appropriately and equitably.
- The internal audit assists in oversight since auditors help in the process of the decision-making process, and this is done through the evaluation of the state and municipal government to ensure that they do what is necessary.
- The internal auditors provide the insight into the process of decision making through assessment of the programs as well as policies that are feasible and those which are not feasible.
- The internal audit assists the municipal and states governments to look forward to the identification of the trends to bring attention to challenges that are emerging before they turned into what can be termed as crises.
- There is a principle of equity that is brought about in the state and municipal government by the internal audit.
- The internal audit assists the state and municipal government to have consistency towards the principle of integrity.
- The internal audit brings the state and municipal government to have transparency, which relates to the openness of sectors to those who are their constituents.
- It helps in installing ethics since the state, and municipal governments need to ensure that there is good governance.
- Internal auditing assists in setting direction on good governance through the establishment of the policies which guide the government actions and improving their functions.
How does internal audit help municipal and state governments improve their functioning?
The internal audit is considered to be among the great value to the state and municipal governments. It assists in the management of these governments as well as monitoring the proper functioning and design of the internal control procedures and policies. An effective internal audit of the municipal and state governments strengthens their governance by increasing the ability of the citizens to holds them accountable. Since the state and the municipal government’s success is primarily measured by the ability to deliver to the citizens, and also carry out their programs equitably and appropriately, there are authorities in the public sectors who are responsible for protecting the public sector as the governments serve the citizens. The internal audits assess the inner control of the organization, and this includes accounting processes and businessdomination. This is done to ensure compliance with the regulations and laws, and this assists in maintaining timely and accurate financial reporting and collection of data. The audit activity should be authorized to assist in acting with honesty and also producing many reliable services. Means at which auditors get these goals may differ from one department to another. This paper seeks to discuss how the internal audit helps municipal and state governments improve their functioning.
An internal audit in the public sectors such as state and municipal government involves myriad audit activities and also reporting the type of relationship which exists in various jurisdictions. An internal audit in the state and municipal government activities should be configured to improve the function of these sectors. With internal audits, they can become transparent and accountable to the public and also realize their objectives effectively, efficiently, ethically, and economically.
Internal auditing is the cornerstone for having good governance at both municipal and state governments. Through conducting objective and unbiased internal auditing, it is possible to determine whether the public resources are managed effectively and responsibly as well as if intended results are achieved. Internal auditing also helps in attaining accountability as well as integrity hence improving the operation, which later results in instilling confidence among the people and different stakeholders. Having an internal audit strengthens the governance in these sectors by ensuring that there are accountability and transparency, credibility, appropriate behavior, equity of official to the public, and lowering the risks of corruption.
An internal audit has been designed to assist the state and municipal governments in achieving their objectives. The fulfillment of these governments’ objectives defines the attainment of their success (James, 2018). It is the realization of the objectives for these governments that defines their success, and in case they are coherent and can be measured, they define the achievements of these governments. Most of the state and municipal governments have their vision and mission statements. The vision statements assist in communicating aspirations of what is to be achieved in the future by the governments. The mission statement conveys what the governments are as well as what it determines to achieve.
The internal audit assists in oversight since auditors help in the process of the decision making process as they exercise a thorough oversight evaluation of the state and municipal governmentsto ensure that they do what is necessary. Through the oversight, the internal auditors ensure that these governments spend the fund for the purposes that are intended. It also ensures that governments follow laws and regulations stipulated in the constitution. Audits focus on the oversight by determining how the policies have been implemented and how various government authorities control and minimize the possible risks. The governments’ structuresare supported by the internal auditors to verify the programs. The internal auditors also support their agencies’ reports of programmatic and financial performance and also testing adherence to the rules and aims.
Furthermore, the internal audit helps in contributing to public accountability through the provision of access to the performance information. The elected and appointed members of municipal and state governments, as well as managers in public sectors, are the people responsible for setting the direction and objectives to be taken by the government. Additionally, the government officials have a duty of assessing the possible risks and as well as to establish the effective control measure for averting the risks and achieve the objectives. In the oversight roles, the internal auditors evaluate and report the achievement of such efforts. Through the oversight roles, the internal auditors can detect and deter various forms of public exploitation by government officials such as the waste, fraud, abuse, as well as other forms of misuse of public resources and power that are entrusted to the officials of the government. The internal auditors also observe the effectiveness of administration internal control structure for them to classify and also moderate the type of situations which might result in corruption. In the state and the municipal governments, the internal auditors are answerablefor answeringthe corruption allegation that they serve through deterrence and detection. The internal auditors do the detection for them to identify the abusive, fraudulent, illegal, inefficient, or inappropriate acts which have transpired and also help in collecting the evidence that supports the process of decision making concerning the disciplinary actions, criminal prosecutions, and other remedies. During the normal functioning of the state and municipal government, the internal auditors make investigation that is based on the complaints or circumstances which might occur in certain tests and procedures for the identification of the abusive, wasteful, and fraudulent activities.
Moreover, when the red flag appears during the internal audit that is initiated from a distinct reason, reasons can result in supplementary procedures to the identified acts of abuse, waste, and fraud. This helps the governments functioning to be free from corruption and even detect the presence of corruption in the early stages. The internal audit of payroll, information system security audits, or accounts payable helps in the government disbursements as well as the related controls. The internal audit also helps to analyze and control the complex financial transaction and statements that are used by the government for investigation and also building financial statement evidentiary cases that are made against the perpetrators. Internal audit helps in reviewing any form of potential conflicts of interest in the course of development and implementation of the procedures, rules, and laws by both the state and internal government.
An internal audit is used to identify and reduce the conditions which allow corruption to occur. The internal auditors support the municipal and state government to assess the controls for the proposed or existing functions. It correspondingly allows the government to review the proposed changes that can be made to the existing rules, laws, as well as the implementation of procedures. It besidescontributes in reviewing the contracts for possible conflicts of interest.
The internal auditors moreover provide insight into the process of decision making through assessment of the programs as well as policies that are feasible and those which are not feasible. It also helps in sharing the benchmarking information and best practices and then looking horizontally across the municipal and state governments’ entities and vertically at different levels of these governments to adopt, reengineer and borrow the best management practices. The internal audit assists in the institutionalization of the governments learning through the provision of ongoing feedback for adjusting the policies. The internal auditors conduct the work systematically and also objectively for them to develop a detailed understanding of the state and municipal governments operations and draw conclusions based that on evidence (Kıral&Hatipoğlu, 2019).Therefore, the internal audit offers an insightful description of the responsibilities, roles, problems, and resources which combine with the clear understanding of the root cause of the user conditions and problems and also recommendations to the state and municipal government. It can also encourage stakeholders of the state and national government to rethink the possible solutions to the problems. Through the internal audit, the performance of specific programs within the state and municipal government can be improved, and working through these issues brought to light by the internal audit can enhance the capacity of these governments to deal with such form of problems. Audits which focus on the insights bring forth the ability to answer the question of whether the government has attained intended results to the people. Therefore, internal audit brings accountability to improving these governments’ functions.
The internal audit also assists the municipal and states governments to look forward through the identification of the trends and also brings attention to the challenges that are emerging before they turned into what can be termed as crises (Mat Zain, Zaman, & Mohamed, 2015).The internal audit activity helps in highlighting the challenges that might come to realize, such as those from economic conditions, demographics trends, and changing into the security threats. It helps in the identification of the opportunities and risks that are arising from evolving technology and science, international events, the complexities of modern society, as well as the economy of nature. Such form issues represent the long-term risks that might be exceeding the office terms of either appointed or elected members municipal and the state government official. It can sometimes have low priority for attention in these cases where there are scarce resources that drive a lot of concern on the urgent apprehensions.
Additionally, the internal audit focuses on foresight to assist in answering the question concerning the types of implementation or policy revisions that would meet future risks and need. When internal auditors focus on the trends available and look forward, they assist in the process of decision making. Therefore, in the municipal and state government, the internal audit assists in help the official to understand as well as initiate the process of risk assessment. Moreover, internal audit ensures that audit resources are effectively used for addressing the areas which are of greatest exposure.
An internal audit similarlyaids in improving the efficiency of operation of the state and municipal governments by objectively reviewing the procedures and policies set by these governments. It helps the governments to have assurances that whatever they are doing it as per the underlined procedures and policies that are laid forth. Following these procedures effectively is adequate when it comes to mitigating the unique risks. Through continuous reviewing the processes that are used in the government, it is possible to make identification of the control recommendations for improving the effectiveness and efficiency of the processes. In turn, it allows the governments to be dependent on the right processes, rather than depending on people. An internal audit of the state and municipal governments also benefitsthem in protecting the making evaluation of the possible risks. Also, it protects the assets as it assists the elected and appointed officials in both municipal and state governments to make identification and then prioritizing the risks through having a systematic assessment of risks. Risk assessment at municipal and state government helps in identification of gap that occurs in the environment and also allows remediation of a plan to be made. The in-state and municipal government, an internal audit helps in tracking and documenting changes that could have been made and also mitigate any possible risks that are likely to occur.
There is correspondingly an assessment of the control of the environment through internal auditing of municipal and state governments. They support in assessing efficiency and making operation on the effectiveness of the control environment that is by these governments. It assists in determining whether the controls are fulfilling their purposes and determining whether they are adequate in the mitigation of risks that might occur.The effective internal auditor strengthens the governance in the state and municipal since it materially increases the ability of citizens to hold their government accountable. Internal auditing performs an important function in these governments, which assist in reducing the possibility of having a risk of public corruption.
The internal audit similarlyempowers these government to employ the competent staff has it ensures that the staffs consist of the professional staffs have the qualifications that are necessary as well as the competence to conduct a full range of roles and responsibility (Kıral&Hatipoğlu, 2019). It ensures that there is no nepotism or any form of corruption that is used to employ those who are not qualified, which might hamper the effective functioning of these governments. Therefore, it ensures that the relevant professional complieswith the standards needed.
Internal auditing assists in setting direction on good governance through the establishment of the policies which guide the government actions and improving their functions. In the public sector, such as the municipal and state government, the policies are directed through the designated oversight organizations, performance goals, strategic plans, and their goals, or the legislative oversight. The internal ensure that all these are adhered to by the state and municipal government.
It also helps in installing the ethics since for the state and municipal government to ensure that there is good governance, there needs to be articulate necessary ethical values, strategies, and objectivities (Pilcher, 2014). Internal auditing helps in aligning the policies and procedures that encourage the elected and appointed official to behave in a manner that is consistent with the values and ethics. An internal audit allows these governments to achieve those behaviorsconsistent with the setting ethics, which encourages accountability and hold people responsible for doing that which are right.
Internal audit brings the state and municipal government to have transparency, and this principle relates to the openness of these sectors to those who are their constituents.
Furthermore, the public sectors such as state and municipal governments must publish their meeting notices and the agenda items; the internal is used to assist in determining if the discussed plan is implemented. Therefore, internal auditing offers a direct link between credibility and transparency in the public sectors. The public and the lawmakers look at the internal audit to gain assurance that the function of the state and municipal governments are functions legally and ethically and also to ensure that the performance and financial reporting are accurately reflecting the true measure of operation.
The internal audit is also done to assist the state and municipal government to consist of the principle of integrity. The integrity principle calls for the official in these government offices to act steadily with the values and ethical principles, policies, prospects, as well as the outcome that is achieved in the public sectors. There will be an erosion of the public trust in case the information and the action are not credible or if they undermine the legitimacy in the public sector, hence influencing the ability to govern. Internal audit disseminates the information to the stakeholders and authorities, and this helps in ensuring that integrity is considered in these areas. Therefore, with an internal audit in place, the officials of state and national governments will fear the consequences of violating their expectations of a high level of integrity that is expected of them.
The principle of equity that is brought about in the state and municipal government by the internal audit. This principle is used to relate how the officials exercise that power which is entrusted on them.In exercising responsibilities, money and power are audited to determine the possibilities of using public resources by governments as well as those issues that involve the poor management and corruption, which might negatively impact the obligations and services that are delivered to the citizens. During internal auditing, the principle equity is used to evaluate and measure the service costs, services delivery, police and regulatory power, and exchange of information. Internal auditor audits services of those paid by fees and taxes charged by the governments and funds borrowed, the service deliveries are those of direct services such as public education, health, transportation infrastructure.
References
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Kıral, H., &Hatipoğlu, İ. İ. (2019).Centralization of the public internal audit system in England and the establishment of the government internal audit agency. Sosyoekonomi, 58(2), 175-185. https://doi.org/10.17233/sosyoekonomi.2019.01.10
Mat Zain, M., Zaman, M., & Mohamed, Z. (2015).The effect of internal audit function quality and internal audit contribution to external audit on audit fees. International Journal of Auditing, 19(3), 134-147. https://doi.org/10.1111/ijau.12043
Pilcher, R. (2014). Role of internal audit in Australian local government governance: A step in the right direction. Financial Accountability & Management, 30(2), 206-237. https://doi.org/10.1111/faam.12034
Rich, K. T., & Zhang, J. X. (2014). Does the audit committee monitoring matter in the government sector? Evidence from municipal internal control quality. SSRN Electronic Journal, 12(5), 11-37. https://doi.org/10.2139/ssrn.2388292
Sam, 1.(2019). Auditor involvement with municipal securities filings. Audit and Accounting Guide, 5(1), 799-811. https://doi.org/10.1002/9781119663614.ch18