Discuss abotu the Internal Audit in your chosen Companies.
Applying Audit Practices: British Telecom is United Kingdom’s maincommunications services company, with yearly revenue of £ 20 bn. It has a workforce of around 90,000 and operates in more than 170 countries. Its new director of internal audit Mr James Grigor has ensured that each of its six lines of business has its own set of internal audit team (Home.bt.com, 2018). Grigor has made a string of changes in the internal audit practices. The internal audit’s work plan is planned on a yearly basis and is subjected to quarterly review. BT has increased its focus on the training and development of the internal audit teams, focusing on adequate training and professional qualifications. Grigor has also ensured that the company’s internal audit teams, provide assurance services and has tried to make it the audit team’s focal point.
Met Office: Met office is the United Kingdom’s national weather service. It is an executive agency of the Dept. Of Business, Energy and Industrial Strategy, headed by Nick Jobling and Scientist, Prof. Stephen Belcher. It is primarily engaged with the duty of reporting weather for castings and warnings. Jonathan Kidd is the head of the internal audit of Met Office (Met Office, 2018). The internal audit function in Met office is divided into three main Auditors and three junior auditors. This procedure follows a risk based approach towards audit functions. It also conducts fraud investigations and also provides consultancy services. It looks to the risks, with the corporate objectives and proposes audit on the ABC model from high to lower risks. Most importantly, the role and the jurisdiction of the internal audit’ work have been agreed upon by the Audit committee, with a room for flexibility. It is also ensured that the internal audit’s work is in alignment with the management’s views on risk (Louwers et al., 2015).
Travis Perkins: It is a Financial Times Stock Exchange registered company and is the primary supplier towards the building and construction market of the United Kingdom. It has a turnover of £4.8bn and it operates with over 2000 branches. Mr David Finch, its director of the company’s business risk and assurance wing, says that the scope of the internal audit has been laid out in the company charter. This has been agreed and ratified by the audit committee (Travisperkins.co.uk, 2018). According to Mr Finch, if the internal audit is to be independent, in such cases, it becomes beneficial in setting up the charter and its terms, in order to avoid going back for any help in case of contingencies.
InterContinental Hotel Groups (IHG): IHG has the reputation of being regarded as one of the biggest hotel chains worldwide. It has over 4500managed or franchise hotels, in over a 100 countries. According to Bruce Vincent’ International head of internal audit of (IHG), it has 28 internal auditors globally and it has globalised this from its original regional shape after 2008, for the purpose of centralising the efforts and judicious use of resources. Moreover, it has led to more transparency and less duplication of work. IHG applies a combined assurance model and risk based internal audit approach, which assists in determining the scope of the internal audit. This helps in prioritising over other areas, where risk assessment is more important.
Development for Work and Pension (DWP): It is the organisation which is primarily responsible for carrying out the pension and other benefits to the general people. Mark Ripley, its head of internal auditing ensures that his team of internal audit understands, the work which is being done, it is also ensured that the teams are adequately experienced in handling such cases, ensures the application of self-assurance and even uses an integrated assurance framework and conducts intermittent appraisals throughout the life cycle of the project (Gov.uk, 2018).
SABMiller: It is the largest beverages company in the Financial Times Stock Exchange 100 index and is the 2nd biggest brewer in the world, with an income of US $28 bn (Ab-inbev.com, 2018). According to Steve Humphries, internal audit needs to engage actively with the senior stakeholders of the company as their support is crucial, the audit functioning can act in tandem with the required procedures and transparency. It is an important activity for an internal audit is to form a map of other assurance providers, for avoiding duplication of work and plugging the holes. Health checks are also a vital part in ensuring the interest of the stakeholders.
Transport for London (TfL): It is an efficient and the primary body of Greater London Authority, which is entrusted with the task of for the capital’s transportation plans. It looks after every nook and corner of the transport services across London. It is entrusted with the task of providing assurance services. According to Clive Walker, its head of internal audit, accepting a cohesive assurance framework delivers the board and the senior management, with a better view of the ongoing tasks and the procedures of risk recognition. It also upholds a general opinion of the project lifecycle for ensuring an independent view over the project and its implementation (Nickell and Roberts, 2014). It also uses a scoring mechanism, for assessing the critical analysis of these projects and audits.
Met Office: According to Mr Kidd, he has an upright and open association with the chairmen of the audit committee. He is always available by phones and email and also they face no issues in organising a face to face meeting at any time. Every task, its analysis, assessment is discussed regularly and a public transparency is also provided at all times and an independence is also provided in the execution of duties.
Électricité de France (EDF): It is Europe’s biggest electricity based company and is the 2nd main in the world. Its UK audit head Mr Smith has executed a risk centred internal audit as it is the best way for value addition and for providing assurance. It reviews the senior management’s view in risk assessment, prioritising risks are done, development of audit programmes is done and a warning system is used to notify whether recommendations are being acted upon. It has divided its audit universe into sub parts entrusting each of them with their own tasks and responsibilities.
Travis Perkins: Every year Travis Perkins evaluates its internal auditing scenarios to judge its efficacy. Feedback requests are issues after every audit review, scores are also provided, the CIA is also requested to conduct an external review, benchmarking review is also set out, review is done against the professional standards and both the management as well as the audit committee is informed about the progress of the review (Travisperkins.co.uk, 2018).
Ignis Asset Management: It is a part of the Phoenix Group, which is entrusted with the job of being UK’s major life and pension consolidator. According to Miss Arleen McGihan, its head of internal audit, her six strong teams conducts self-assessment of all the activities of internal auditing. The teams conduct questionnaires, incorporating input from the audit committee (Bloomberg, 2018). This helps in getting feedback from the key auditees on the performance of the internal audit. KPIs are also increasingly used, for ensuring their focus on the key assurance areas.
In all the six areas of internal audit, certain best practices have been used. Some of them have been summaries below:
There are a variety of auditing practices which have been adopted by some of the leading companies in an around the world and those, about which have been reported here. Some of these auditing practices are path breaking and have laid the path for the development of the auditing practices. An analysis of these practices is also needed. British Telecom’s focus on excessive training and development of the auditors is a welcome move, as it upholds the quality of the auditing experts. Travis Perkins’ case of using a charter for explaining the scope of the auditing matters is a good move, where the scope can be easily identified, leading to less amount of confusions. Moreover, the audit assurance model is also a great move, which helps in actually measuring the scope of the internal auditing of the company. The practice of adopting the integrated auditing framework and the periodic analysis and review of the life cycle of the projects is also a good move for ensuring proper auditing of the projects. This helps in ensuring proper auditing o these projects. Met Office’s head of internal audit’s open and significantly transparent relationship is a very welcoming prospect, as this helps in conducting auditing operations in a more transparent manner. The warning system adopted by the Électricité de France (EDF) is a welcoming addition in the auditing world. This would help in providing warnings and timely interventions, when it is seen that the auditors are not acting according to the recommendations. Ensuring maximum transparency by conducting an external audit by CIA, setting up of benchmarking are some of the other good methods, which would genuinely help in improving the transparency aspect of internal auditing.
DP World or the Dubai Porting World, as it is commonly known as, is one of the world’s largest container terminal operators. It has a portfolio of about 78 operating marines and inland terminals, which is supported by over 50 connected businesses across 40 different countries, in around six continents (DP World, 2018). It has a significance presence in both the high growth as well as the mature markets. The company has a devoted team of round about 36,000 workers, ranging from 103 countries, working in shipping lines, as importers, exporters and as many other participants of the global marine supply chain. The company’s largest and the most lucrative business is ‘Container handling’ and it produces around three quarters of its entire revenue (DP World, 2018). In the year 2017, the company generated revenue of about US $4.715 billion.
DP World ensures that its internal audit committee helps in ensuring maximum transparency and conduct audit in a fair and unbiased manner, which reflects the true conditions of the company at all times. Some of the practices are as follows:
Implementation of an auditing plan is indispensable for the successful auditing of any business. A formal structure and plan is necessary for this purpose. It is this plan, which provides the skeletal framework, upon which the entire operation of conducting an effective is based upon. If the audit plan is not properly drawn up and prepared, the efficacy of the internal audit takes a major hit (Alzeban and Gwilliam, 2014). Some of the major steps, which can be adopted for ensuring proper implementation of the internal audit, are as follows:
References:
Ab-inbev.com. (2018). Our culture | AB InBev. [online] Available at: https://www.ab-inbev.com/about-us/our-culture.html [Accessed 11 Jul. 2018].
Alzeban, A. and Gwilliam, D., 2014. Factors affecting the internal audit effectiveness: A survey of the Saudi public sector. Journal of International Accounting, Auditing and Taxation, 23(2), pp.74-86.
DP World. (2018). DP World Marine Ports | Our Businesses. [online] Available at: https://web.dpworld.com/our-business/ [Accessed 11 Jul. 2018].
Endaya, K.A. and Hanefah, M.M., 2013. Internal audit effectiveness: An approach proposition to develop the theoretical framework. Research Journal of Finance and Accounting, 4(10), pp.92-102.
Gov.uk. (2018). Department for Work and Pensions – GOV.UK. [online] Available at: https://www.gov.uk/government/organisations/department-for-work-pensions [Accessed 11 Jul. 2018].
Gupta, P. and Sharma, A.M., 2014. A study of the impact of corporate governance practices on firm performance in Indian and South Korean companies. Procedia-Social and Behavioral Sciences, 133, pp.4-11.
Home.bt.com. (2018). Fibre Broadband, TV Packages, BT Sport & Mobile Deals | BT. [online] Available at: https://home.bt.com [Accessed 11 Jul. 2018].
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2015. Auditing & assurance services. McGraw-Hill Education.
Management, I. (2018). Ignis Asset Management: Private Company Information – Bloomberg. [online] Bloomberg.com. Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8121978 [Accessed 11 Jul. 2018].
Met Office. (2018). Weather and climate change. [online] Available at: https://www.metoffice.gov.uk [Accessed 11 Jul. 2018].
Neu, D., Everett, J. and Rahaman, A.S., 2013. Internal auditing and corruption within government: The case of the Canadian Sponsorship Program. Contemporary Accounting Research, 30(3), pp.1223-1250.
Nickell, E.B. and Roberts, R.W., 2014. Organizational legitimacy, conflict, and hypocrisy: An alternative view of the role of internal auditing. Critical Perspectives on Accounting, 25(3), pp.217-221.
Reding, K.F., Sobel, P.J., Anderson, U.L., Head, M.J., Ramamoorti, S., Salamasick, M. and Riddle, C., 2013. Internal Auditing: Assurance & Advisory Services. Institute of Internal Auditors, The IIA Research Foundation.
Saidin, S.Z., 2014. Internal audit effectiveness: Data screening and preliminary analysis. Asian Social Science, 10(10), p.76.
Travisperkins.co.uk. (2018). Travis Perkins | Builders Merchants, Building Supplies & Material. [online] Available at: https://www.travisperkins.co.uk [Accessed 11 Jul. 2018].
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
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