The new definition of internal auditing

The new definition of internal auditing is designed to accommodate the profession’s expanding role and responsibilities:

“Internal auditing is an independent,
objective assurance and consulting activity
designed to add value and improve an organization’s operations.

It helps an organization accomplish its objectives
by
bringing a systematic, disciplined approach
to evaluate and improve the effectiveness of
risk management, control, and governance processes.”

Chapman & Anderson (2002) explain that this new definition of internal auditing presents a
new image of the profession in six significant ways:

1. As an objective activity, not necessarily established within the organization, the revised definition permits internal auditing services to be provided by “outsiders,” in effect acknowledging that quality internal audit services can now be obtained through outsourcing.
2. By emphasizing that the scope of internal auditing encompasses assurance and consulting activities, the new definition projects internal auditing as proactive and customer-focused, and concerned with key issues in control, risk management, and governance.
3. By explicitly stating that internal auditing is designed to add value and improve anorganization’s operations, , the new definition underscores the significant contribution that internal auditing makes for any organization.
4. By considering the whole organization, the new definition perceives internal auditing’s mandate much more broadly, charging it with helping the organization accomplish overall objectives.
5. The new definition assumes that controls only exist to help the organization manage its risk and promote effective governance. Such a perspective considerably broadens the horizons of internal auditing and expands its working domain to include risk management, control, and governance processes.
6. The new definition accepts that the internal auditing profession’s legacy, consisting of its unique franchise in being a standards-based profession, may well be its most enduring and valuable asset. Rigorous standards provide the basis for crafting a documented, disciplined, and systematic process that assures quality performance on internal audit engagements.
   

The roots of auditing

The roots of auditing, in general, are intuitively described by accounting historian Richard Brown (1905, quoted in Mautz & Sharaf, 1961) as follows:
“The origin of auditing goes back to times scarcely less remote than that of accounting…Whenever the advance of civilization brought about the necessity of one man being intrusted to some extent with the property of another, the advisability of some kind of check upon the fidelity of the former would become apparent.”