Indeed there is little to no guidance on internal audit from the Charity Commission which means many trustees are simply unaware of the value an internal audit function can bring. As a result whilst some organisations embrace internal audit many others have not even had a conversation about the merits of such a service.
A robust internal audit service is an assurance process that should give trustees and senior leaders of an organisation confidence that systems and controls are operating effectively. The objective of an internal audit process is very different to a year end external audit, and obtaining assurance throughout the year means any issues are identified sooner. Internal audits are often where problems are first identified.
An organisation’s internal audit should be viewed as a ‘critical friend’, a pair of eyes interrogating operations across the whole entity.
Last year the Chartered Institute of Internal Auditors published an Internal Audit Code of Practice which is aimed as much at the third sector as private sector organisations. This Code aims to enhance the overall effectiveness of internal audit, and its impact, and its recommendations can be regarded as a benchmark of good practice against which organisations can assess their internal audit function.
Internal audit is appropriate for almost any organisation of a reasonable size, however the approach does need to be commensurate with the complexity of the charity.
Internal audit, despite its name, can be an outsourced service, and here at UHY we provided internal audit services to a number of not for profit entities.
Topics that can be covered include:
- Payroll and HR
- Data protection and information security
- Risk management
- Key finance controls
- Fraud, theft and bribery
- Budget control and management accounting
- Fund accounting
Charity leaders should also take a look at the Charity Commission CC8 guidance on internal financial controls for charities. This explains why internal financial controls are essential procedures that help trustees to fulfil their legal duties to safeguard the charity’s assets and administer the charity’s finances in a way that identifies and manages risk.
The next steps
If you would like to discuss internal audit or just your internal financial controls with UHY please contact Allan Hickie or your local office.