Any successful organization must establish a basic framework through which both long-term and day-to-day decisions will be made. In most organizations, internal audit can be a key enabler to that success.
Before you can fully understand how an internal audit function can serve such a role, it is important first to understand how organizations are structured and operate to achieve success.
Although the actual organizational structure will vary from one organization to the next, each must establish an overall governance structure to ensure key stakeholder needs are met. This governance structure provides direction to those executing the day-to- day activities of managing the risks inherent in an organization’s business model. These day-to-day activities represent internal control.
Governance structure may be established to comply with laws and regulations in the jurisdictions in which an organization operates. These laws and regulations are typically promulgated to protect the public’s interest. Additionally, the board and management of an organization may establish governance structures to ensure the needs of key stakeholders are met and that the organization operates within the boundaries and values established by the board and senior management.
Corporate governance involves a set of relationships between a company’s management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.