Introduction

The internal audit function is a fundamental pillar of any company’s growth and sustainability. It goes beyond just reviewing accounts, providing an objective assessment of risks and a comprehensive analysis of processes and systems to enhance efficiency and transparency. Through periodic and random inspections, auditors can uncover hidden issues, ensure effective coordination between departments, and achieve the organization’s operational and strategic objectives.

At OMK, the leading accounting and auditing firm in Saudi Arabia, we believe that internal auditing is not just a regulatory obligation, but a strategic tool that adds real value to businesses. 

Through our professional services, we help you detect risks early and provide recommendations based on global best practices to ensure continuous performance improvement, reduce waste, and strengthen internal control.

Learn more about internal audit and how OMK can be your ideal partner in achieving strong financial governance and supporting your business growth with confidence and efficiency.

What is internal audit?

Internal auditing is an independent, objective consulting activity conducted within a company to review and analyze systems, procedures, and operational processes to provide assurance about their effectiveness and compliance. 

Essentially, internal auditing evaluates the effectiveness of internal controls, improves risk management, and ensures that operations are aligned with the company’s overall objectives and strategies.

Internal auditing helps teams achieve their goals by providing insights and recommendations based on a disciplined, systematic approach and from an impartial perspective that promotes transparency and accountability. The key areas of focus for internal auditing include:

1. Operational risks and identifying potential vulnerabilities
2. Environmental compliance and regulatory compliance
3. Efficiency of internal procedures and effectiveness of work systems
4. Fraud control and detection of potential manipulation
5. Commitment to health and safety in the workplace
6. Alignment of activities with the company’s strategic objectives

In short, internal audit is an indispensable strategic tool for enhancing corporate governance, strengthening operational structures, and achieving sustainable development.

Importance of internal auditing

Internal audit is an essential component of corporate governance and plays a critical role that should not be overlooked in any organization, regardless of its size or sector.

Internal auditors operate in a wide range of sectors, such as healthcare, technology, education, and government, providing real value by continually reviewing processes and examining internal systems.

The importance of internal audit lies in enhancing the effectiveness of risk management and controls, improving the organization’s overall performance by early detection of potential problems, and identifying new opportunities for improvement and savings. Internal audit also contributes to the decision-making process by providing accurate and objective reports that enable management to assess the current situation and take timely corrective action.

The success of the internal audit function depends on a well-thought-out audit plan and comprehensive risk assessment, making it an ongoing and essential part of an organization’s work, whether it covers all operational activities or focuses on a specific aspect. 

Ultimately, the primary goal of internal audit is to provide independent assurance on the effectiveness of controls and business processes, enhancing the organization’s long-term reliability and sustainability.

Essential Elements of Internal Auditing

The five core elements of internal audit reports serve as the framework for audit teams to provide a comprehensive and accurate assessment of any problem or deficiency within organizational processes. This structure ensures that information is clearly communicated to management and the board of directors and enhances the effectiveness of corrective action implementation. A detailed explanation of each element is provided below:

1 Criteria

Defines the frame of reference or rules against which performance or behavior is measured.

1. What was audited?
2. Who commissioned the audit?
3. What reference, policy, or standard is used as the basis for the audit?
4. Are there previous audits or known risks that warranted the audit?

2 Condition

Displays the actual condition discovered during the audit compared to the required standards.

1. Were policy violations found?
2. To what extent do current procedures deviate from expectations or objectives?
3. Were any deficiencies or weaknesses detected in internal controls?

3 Cause

Identifies the root causes that led to the problem or deviation.

1. Why did the problem occur?
2. Was there a process flaw or lack of training?
3. Were procedures ignored or misunderstood?

4 Effect

Explains the impact or damage resulting from the problem.

1. What are the financial or operational consequences?
2. Are there compliance or reputational threats?
3. Have customer relationships or service quality been affected?

5 Corrective Action

Provides solutions and recommendations to address the problem and prevent its recurrence.

1. What should be done now?
2. What is the proposed action plan?
3. How will the effectiveness of implementation be monitored?

What is the role of internal audit?

Internal audit is a fundamental pillar of good governance and ensuring the effectiveness of systems within companies. It provides an independent and objective assessment of internal controls and operational effectiveness, helping senior management represented by the CEO or the audit committee make informed decisions. 

Internal audit reviews vital company activities, such as accounting, financial reporting, technology controls, and the supply chain, with the goal of improving performance, detecting risks early, and ensuring compliance with laws and regulatory standards.

Through its independence, internal audit provides a comprehensive view of the effectiveness of systems and enhances the integrity of operations and corporate transparency. OMK, the leading accounting and auditing firm in Saudi Arabia, provides highly professional internal audit services that contribute to raising business quality and supporting companies’ journey towards sustainability and secure growth.

Common mistakes that can hinder the internal audit process

One of the most significant challenges that can hinder the effectiveness of internal auditing and reduce its effectiveness is the occurrence of some common mistakes that must be avoided to ensure the process runs smoothly and efficiently. At OMK, through our experience in implementing successful internal audits, we have identified the most prominent of these mistakes.

The most prominent of these mistakes is expanding the scope without prior planning, as the audit can transform from a focused process into an ill-considered, comprehensive review that consumes time and resources.

Failure to involve key stakeholders from the beginning of the process is also a major mistake, as it leads to an inaccurate understanding of the actual reality of operations within the organization.

Another common mistake is relying on inaccurate data or without verifying its original source, which can lead to erroneous conclusions. Finally, the loss of independence and objectivity especially in small companies is one of the biggest challenges, as complete impartiality must be maintained, even when reviewing work related to the same department.

Overcoming these mistakes is an essential step towards an effective and transparent internal audit that enhances a company’s performance and ensures sound governance.

Conclusion:

We hope this guide has helped you better understand the role of internal audit, how to prepare for it, and how to avoid risks that could hinder its progress. 

Internal audit is a fundamental pillar for enhancing governance and achieving operational efficiency. With our accumulated experience at OMK, we are committed to providing accurate and objective audits that support your organization’s objectives.

If you are looking for a trusted partner to help you meet compliance requirements and develop your internal systems, we at OMK, the premier accounting and auditing firm, offer comprehensive internal and financial audit services, and are pleased to provide specialized chartered accountants and professional tax advice. Please feel free to contact us today for an initial consultation and an audit plan tailored to your organization’s needs.