You need to know that the quality standards of internal audit reports have an important role for many parties, especially for companies in making better decisions.
This is because the audit report not only contains data, but also represents the integrity and credibility of a company.
As for investors, the implementation of quality standards for internal audit reports allows them to obtain accurate information about the company's operational management system, performance, internal controls, and others.
So, from this review, investors can determine the decision to invest.
To better understand the quality standards of internal audit reports, refer to the explanation of the following article.
Read Also: Understanding Audit Standards along with 3 Types and Their Qualifications
Quality Standards Of Internal Audit Reports
Quality standard audit report internal is a criterion used to determine the quality of the inspection report.
With the existence of quality standards, you can ensure the credibility, objectivity and professionalism of internal audit reports made by auditors.
Basically, the preparation of audit reports refers to the IIA (Institute of Internal Auditors) or IPPF (International Professional Practices Framework) communication standards used by auditors in general.
The quality standards of internal audit reports that will be explained this time are based on IIA 2410 and IIA 2420 standards.
1. Standar IIA 2410 – Criteria for Communicating
Based on the IIA 2410 standard, among the criteria or elements that need and should be covered in the audit report are the following:
- Scope of audit, objectives, and methodology of audit
- Audit findings, evidence supporting the findings, and the impact of the findings
- Conclusions, recommendations and suggestions for improvement
- Audit opinion (conducted on several audits by providing opinions on internal control or compliance with regulations)
2. Standard IIA 2420 – Quality for Communicating
Standard IIA 2424 is a standard that applies to the entire audit process, including internal audit report quality standards.
Thus, if the internal audit report complies with the principles of this standard, the company's management will easily understand and follow up on the recommended improvement plan auditor. in the audit results.
Among the principles that need to be adhered to to ensure the effectiveness and quality of audit reports are the following:
a. Akurat (Accurate)
Quality standards of the first internal audit report is to be accurate, which audit report must be error-free, not distorted, and always in accordance with the facts.
To ensure the accuracy of internal audit reports, an auditor must use precise and unambiguous words, disclose all material facts, and be supported by valid evidence findings.
Sebagaimana yang telah tertulis pada kode etik IIA ini, bahwa auditor perlu “disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.”
Thus, it is clear that not disclosing all the facts that are true and exist can make the quality standards of internal audit reports misleading.
Therefore, keep in mind if an error occurs in the audit process this, the Chief Audit Executive (CAE) must correct with correct information in a transparent manner and in accordance with applicable standards.
Read Also: Internal Audit Code of ethics as a standard in the implementation of Internal Audit
b. Objektif (Objective)
An internal audit report can be said to be of quality if it meets the objective principles, which are fundamental principles in conducting an audit.
Objective in this case means that the auditor should use unbiased phrases and focus only on the shortcomings of the process of its implementation.
Objective as a quality standard of internal audit reports allows auditors to be neutral, not affected by certain interests, and not attacking and siding with certain sides.
This is because standard quality for communication not only the principles in communicating when submitting audit reports, but also the ethics that must be followed by a professional auditor.
c. Clear
The next standard of quality of internal audit reports is the importance of audit communication with clear language and easily understood by the audience.
In this case the auditor needs to use language with terms appropriate to the industry and organization and avoid unnecessary technical language.
Based on this 2420 standard, audit reports must also be logical, systematic, and rationally presented.
Thus, by presenting observations and findings as well as valid evidence, the clarity of the audit report will increase and make it easier for management to understand and follow up.
d. Ringkas (Concise)
The next principle is the quality standard of a concise internal audit report, for which the auditor must ensure audit communication is carried out concisely.
The point is concise, not long-winded, and directly discuss the core of the problem without having to allude to information that is not important or not related to the implementation process.
e. Constructive (Constructive)
Internal audit reports should be created using a constructive tone that is tailored to the severity of the observed findings.
This of course aims to create a collaborative attitude in providing solutions and making improvements in a way to help the positive development of a company.
f. Full (Complete)
Completeness is also a quality standard for internal audit reports, which audit reports must contain important information needed by the audience comprehensively.
In this case, the auditor needs to review the information that is essential for the intended audience, organization or industry.
That's because presenting a complete written audit report means allowing the audience to come to the same conclusion as the audit team.
By this we mean that all evidence, analysis, and observation can support the auditor's conclusions and there are no differences in interpretation or misunderstandings in understanding the audit.
g. On Time (Timely)
The quality standards of internal audit reports also emphasize the importance of delivery based on a set schedule.
Basically, the audit team has set a time limit on the audit process during audit planning.
Thus, submitting an audit report within a predetermined deadline shows the quality standards of the resulting report.
Nonetheless, each organization or company has varied timeliness that can be measured by benchmarking and other research that is still relevant to the topic of audit.
In addition, to measure the speed of time for the submission of audit reports, CAE will set KPIs (Key Performance indicators).
Important components in the Internal Audit Report
Quality standards of internal audit reports have important for management and stakeholders in providing in-depth insight into the company's operational systems, performance, and compliance with regulations.
Thus, in producing quality and effective audit reports, the information submitted must be precise, easy to understand, and provide actionable solutions.
Among the important structures in the internal audit report that must be prepared by the auditor based on the standard are the following:
1. Clear and concise communication
- Use straightforward and clear language in describing findings, risks, and recommendations
- Structuring audit reports logically and easily navigated
- Maintain consistency and clarity of internal audit reports by using template uniform reports
2. Actionable insights
- The audit report not only reviews the problems within the company, but also contains clear, specific, and actionable recommendations by management
- Determine responsibility for suggested recommendations and set deadlines for improvement plans
3. Evidence-based findings
- Draw conclusions based on strong evidence
- Include observational data to support the findings
- Evidence-based findings and observations will increase its credibility and reliability
4. Comprehensive risk assessment
- Performing risk assessment and and make the priority level
- Outlining the consequences of each risk and identifying its urgency before it is addressed
- Help stakeholders to focus on the crucial part to be repaired.
5. Visual representation of data
- Use visualizations, such as graphs, tables, or diagrams to present data in audit reports
- Improve the understanding of the relevant audience to understand the core of the problem and make improvements
6. Follow-up mechanism
- The audit report also includes a follow-up improvement section to review the status of the company's implementation of the recommendations provided
- Helps ensure corrective actions are implemented and effective for organizational change for the better
Internal audit report quality standards are not only used to ensure the effectiveness of operational systems and their compliance with applicable regulations.
However, also in providing recommendations for corrective actions to support the company's sustainable growth.
This can be done by meeting the quality standards of internal audit reports and using template appropriate.
Because once again, a quality and effective audit report allows the development of the company in the long term, including in compliance with the rules.
Conclusion
Thus is an explanation of the quality standards of internal audit reports based on applicable standards.
This not only ensures the quality of the reports produced, but also the effectiveness of the audit report function for many parties in making decisions.
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