Internal Auditing

Auditing as a profession as evolved drastically over decades and as time has passed auditing activities has expanded from performing specific assurance activities for management, to assisting and advising management with their specific business activities. The Institute of Internal Auditors define internal auditing as ‘”…an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.’ (Institute of Internal Auditors, 2013) Through this definition it can be explained why auditors can be seen as the ‘eyes and ears’ of management. Concentrating specifically on the principles of Governance, the usage of Internal Auditing Standards, the Current Role of Internal Auditing in SA, reviewing current crisis, the importance of Internal Auditing to management is evident.

2. FUNDAMENTAL PRINCIPLES RELATED TO GOVERNANCE

2.1 Corporate Governance in South Africa

To understand the role internal auditors play in improving governance processes, one has to fully understand the meaning of the word governance and also the role governance plays in South Africa. Smerdon states that corporate governance is ‘the system by which companies are directed and controlled.’ (Smerdon, 1998, p.1) It is said that corporate governance was introduced due to the agency problem which was that managers of companies used their control or position to their own advantage and to the business’s disadvantage. Corporate governance was initiated to ensure that the agents of the owners of the companies acted at the best i...

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...r insights on these issues.

The development in corporate governance has been one on the most significant factors that has contributed to the growth of internal auditing over the past few years. Governance frameworks and models vary according to the type of organisation. Corporate governance is South Africa is developing at a rapid rate and due to this; the role of governance needs to be consistently updated.

The internal auditing profession is new in South Africa and through the compliance with these standards, structure and support is given to these developing internal auditors.

Therefore, it is evident that mangers and internal auditors have common objectives and this would be to achieve the proposed objectives. In this way auditors can be seen as the eyes and ears of management, providing independent assurance and consulting activities to reach common goals.