Role of internal audit

In this lesson

1. 0:00 Introduction to internal audit
2. 0:20 Role of internal audit in control systems
3. 1:13 Key differences between internal and external audit
4. 3:01 Objectives, appointment and standards compared
5. 4:16 Independence requirements and qualifications
6. 5:06 Reporting structure and audit committee role
7. 6:20 Ideal governance structure for internal audit
8. 7:07 Internal audit in smaller organisations

About this lesson

Essential for understanding the audit and assurance framework covered in your AA or AAA studies. Internal audit is part of an entity's internal control system designed to improve operational efficiency and effectiveness. Unlike external auditors—who form opinions on financial statements and must be independent professionals—internal auditors aim to strengthen governance and risk management processes. They can be employees or external contractors, but must remain objectively independent and report directly to the audit committee or those charged with governance to protect their objectivity. The key differences matter in practice. External auditors follow International Standards on Auditing and must be qualified accountants; internal auditors have no mandatory qualifications or standards, though guidelines exist. Critically, external audit teams can never perform internal audit work, as this creates a self-review threat. Understanding this distinction helps you explain audit roles clearly to clients and recognises how external auditors may rely on internal audit work when quality and expertise standards are met. The internal audit function sits below the board, ideally reporting to an audit committee that appoints them, reviews their work plans, and monitors effectiveness. This structure ensures internal auditors have direct access to raise concerns independently, separate from operational management—a safeguard especially important in smaller entities without a formal audit committee.

Duration: 8m