Internal auditors play an important role in maintaining the effectiveness of the organization's internal control, governance, and risk management. This article discusses the definition, code of conduct, differences with external auditors, roles, functions, duties & responsibilities, required competencies, salary and career aspects, and best practices that can increase the added value of the internal audit function
What is an internal Auditor
General definition
Auditors interns are professionals who work within organizations to evaluate and improve the effectiveness of risk management, internal control, and governance processes. This function is objective and independent in the context of the organization (despite its status as an employee), with the aim of providing assurance and advisory services to management and the board.
Purpose of internal audit function
- Ensure that processes and controls run effectively.
- Identify risk areas and provide mitigation recommendations.
- Support transparency and compliance with internal regulations and policies.
- Drive operational efficiency and process improvement.
Scope of work of an internal auditor
The scope may include financial audit, operasional, kepatuhan, audit TI (IT audit), audit fraud, as well as business process assessment and project-specific review.
Internal auditor code of ethics
A. Basic principles of the code of ethics
The code of ethics of internal auditors generally emphasizes:
- Integrity - act honestly and reliably.
- Objectivity - report findings without bias.
- Confidentiality - safeguard sensitive information of the organization.
- Professional competence - have sufficient knowledge, skills and experience.
- Professionalism - behave according to professional and legal standards.
B. Source code
Code of conduct and working standards are often referenced from professional organizations such as the Institute of Internal Auditors (IIA) or relevant local standards.
C. Examples of ethical dilemmas and their handling
Example: the auditor found a potential conflict of interest in one of the managers. Proper handling: documentation of findings, notification to the competent level (eg. head of internal audit or audit committee), and recommended mitigation measures while maintaining confidentiality during the investigation process.
Difference between internal and external auditors
Status and relationship with the organization
- Internal Auditor usually employees of the organization or part of the internal audit unit.
- External Auditor is an independent party / firm hired from outside to provide opinions on certain financial or compliance statements.
Audit objectives and work focus
- Internal auditors focus on process improvement, risk mitigation, and operational controls.
- External auditors focus on the fairness of financial statements and compliance with applicable accounting principles.
Reporting and independence
Internal auditors report to management and the audit Committee/board; a degree of independence is sought through reporting lines to the highest levels such as the audit committee. External auditors must maintain full independence from clients.
Examples of differences in practice
If there are findings of weaknesses in internal controls, the internal auditor will provide recommendations for improvement and operational follow-up; the external auditor may note such weaknesses in communication to management or adjust the audit opinion if material.
The role of the internal auditor
1. Assurance dan consulting
Internal auditors provide assurance (assessment of the effectiveness of control) and also consulting (process improvement suggestions) when requested.
2. Role in risk management and internal control
Help identify, assess, and monitoring risks and ensure adequate control is applied.
3. Role in governance
Support the transparency and accountability of the organization through clear reporting to the management and audit committee.
Functions of internal auditors
1. Assurance function
Conduct checks to ensure controls are running as planned and meeting organizational goals.
2. Consulting function
Provide process improvement recommendations, assist in the implementation of best practices, and support transformation projects with a risk & control perspective.
3. Monitoring and reporting functions
Monitor the implementation of recommendations, prepare reports on audit results, and report risk trends to management.
Duties and responsibilities of internal auditors
1. Stages of audit work
- Audit planning: determine the scope, objectives, risks, and audit program.
- Implementation: evidence collection, process walkthrough, sampling, interview, and control testing.
- Reporting: preparing reports on findings, root cause analysis, recommendations, and priorities for action.
- Follow-up: monitor the implementation of recommendations and assess the effectiveness of improvements.
2. Specific tasks
- Develop an audit work program.
- Collect and evaluate audit evidence.
- Draw up written findings and recommendations.
- Communicate results to process owners, management, and audit committees.
3. Responsibility to management and board
Responsible for ensuring findings are delivered objectively and followed up on priorities, as well as maintaining clear lines of communication with the audit committee.
4. Documentation and audit evidence
Maintain adequate documentation for findings to be accounted for and for future review/inspection purposes.
See also: Audit Evidence: Meaning, Types, Properties, Characteristics, & Examples
Skills and competencies required of internal auditors
A. Hard skills
- Knowledge of accounting and auditing principles.
- Ability to analyze data and use analytics tools.
- Understanding of it audits (e.g. kontrol akses, change management).
- Evidence sampling and testing techniques.
B. Soft skills
- Effective communication (oral and written).
- Critical thinking and problem solving skills.
- Stakeholder negotiation and management.
- Integrity and professional ethics.
C. Relevant certifications
General certifications that increase credibility: CIA (Certified Internal Auditor), CPA, CISA (Certified Information Systems Auditor), as well as training related to data analytics or fraud examination.
Internal auditor salary
1. Salary determining factors
Salary is influenced by experience, industry sector (finance, manufacturing, technology), location, company size, and job level (junior, senior, manager).
2. Range and benefits
Salary ranges vary between organizations; in addition to the base salary, internal audit employees often receive benefits such as bonuses, training allowances, and career development opportunities.
Internal auditor career and promotion path
A. Typical career path
Auditor junior → Auditor senior → Manager Internal Audit → Head of Internal Audit → posisi manajemen risiko/compliance atau posisi eksekutif lainnya.
B. Career alternatives
Beberapa auditor pindah menjadi konsultan risk & governance, auditor eksternal, atau spesialis IT audit dan compliance.
Challenges and best practices
Common challenges
- Maintain independence while being part of the organization.
- Overcome resistance of operational units to findings.
- Limited resources and audit evidence.
Best practices
- Risk-based audit: prioritize areas with the greatest risk.
- Continuous auditing: utilizing continuous monitoring for early detection.
- Data analytics: incorporate analytics to improve audit coverage and depth.
- Stakeholder engagement: initial communication with the owner of the process to establish buy-ins.
- Strict Follow-up: ensuring recommendations are implemented and their impact measured.
Examples of activities of internal auditors
Case (hypothetical): An Audit of the procurement function found double payments to suppliers due to a manual invoice matching process.
Findings: weaknesses of matching and authorization controls.
Recommendations: terapkan sistem matching otomatis, perbaiki segregation of duties, dan lakukan pelatihan tim pengadaan.
Follow-up & success metrics: reduction of double payment incidents, decreased procurement cycle times, and follow-up audits attest to the effectiveness of the new controls.
Practical steps organizations in need of help internal auditors
Internal auditors are a strategic investment for organizations that want to maintain the integrity of operations, mitigate risk, and improve efficiency. A robust internal audit function helps management make evidence-based decisions and strengthens stakeholder confidence.
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