In 200 1 year, the International Institute of Internal Auditors gave a new definition of internal audit in the revised Standards for the Practice of Internal Auditing: "Internal audit is an independent and objective assurance and consulting activity, whose purpose is to add value to institutions and improve their operational efficiency. It adopts a systematic and standardized method to evaluate and improve the efficiency of risk management, control and governance procedures, thus helping to achieve institutional goals. " The 59th annual meeting of the International Institute of Internal Auditors held in June, 2000 defined internal audit as: "Internal audit is an independent and objective confirmation and consultation activity, aiming at improving the work quality and efficiency of the unit." The redefinition of internal audit reflects the different requirements of internal audit in different environments and the development trend of internal audit profession. However, after the emergence of the new definition, some people in the theoretical circle think that contemporary internal audit has developed into value-added audit, and it seems that adding value to the organization is the only goal of internal audit, and the function of checking the authenticity and legality of financial revenue and expenditure seems to have disappeared from the vision of internal audit. We think this view is biased and even seriously misleading. We should fully understand the new definition of internal audit from the following aspects.
First of all, the environmental change of internal audit has led to a new definition.
After entering the 1990s, the living environment of western enterprises has changed greatly, which puts forward new requirements for internal audit. The new definition is a development guide provided by the International Institute of Internal Auditors for the internal audit profession in line with the development of the external environment.
1, the operational risk increases.
Since 1990s, the risks faced by enterprises in western countries have generally increased. Mainly due to the diversification and internationalization expansion strategy, the product technology changes, the acceleration of mergers and acquisitions and asset reorganization, and the development of information technology and e-commerce, all these businesses make the economic transactions of enterprises more diversified and complicated, and the corresponding control links are difficult to be implemented simultaneously, which greatly increases the business risks of enterprises. How to play an active role in preventing and controlling business risks puts forward new requirements for the function of internal audit. Therefore, the new definition puts forward that internal audit should evaluate and help improve the "risk management" of enterprises.
2. The change of corporate governance structure
The deregulation movement in western countries to promote competition and improve economic vitality and the wave of corporate mergers that followed have had a great impact on corporate governance structure, such as the salary plan of management, changes in the functions and structure of the board of directors, institutional investors giving up passive investment and starting to participate in corporate governance, and incentives for employees' human capital. As an internal evaluation mechanism, how to provide effective guidance for corporate governance has become one of the problems that internal audit must solve. This is also reflected in the new definition, which requires internal audit to evaluate and help enterprises improve "governance procedures".
3. Strategic reorganization of enterprise internal organization.
In order to reduce costs and enhance competitiveness, many western enterprises have reconstructed and adjusted their internal organizational structures and transferred some non-core management activities to external specialized companies. Its purpose is to improve the efficiency of the organization, increase the value of the organization and enhance the competitiveness of the organization. This requirement is fully reflected in the new definition, pointing out that the purpose of internal audit is to "add value to the organization and improve its operational efficiency", highlighting its role in promoting the realization of organizational goals.
Second, the main content elements and changes of the new definition
The new definition of internal audit is very rich, including: ① The essence of internal audit is a kind of "guarantee work and consulting activities". Compared with the "confirmation and consultation activities" proposed by the 59th annual meeting of the International Institute of Internal Auditors, this understanding seems to be a step forward. Replacing "confirmation" with "guarantee work" shows that it puts more emphasis on ensuring the realization of organizational goals, while "confirmation" focuses on proving the authenticity and legitimacy of accounting matters. ② The goal of internal audit is to add value to the organization and improve its operational efficiency. This is in line with the three service ideas put forward by American internal audit in the 1980s, that is, internal audit should serve for strengthening enterprise management, decision-making and improving enterprise economic benefits, otherwise, internal audit is not necessary. This is because enterprises are established to create value and seek benefits for stakeholders, so enterprises must constantly increase their own value, seek benefits for stakeholders, and maintain the confidence of stakeholders. The goal of increasing value should be achieved by all components of an enterprise, and internal audit is no exception. In the process of collecting data, identifying and evaluating risks, internal auditors may gain a deeper understanding of how to create value by comparing members of other organizations. Internal auditors should present these valuable information in the form of consultation, suggestions, written reports or other products to help the corresponding managers. Based on this, the new definition of internal audit puts forward the value proposition of internal audit activities, which requires it to adopt systematic and standardized methods to add value to the organization in the fields of corporate governance, risk and control, which is also logical. On the surface, it is not much different from the formulation of the 59 th annual meeting (improving work quality and improving efficiency), but "adding value" is much more specific than "improving efficiency" It is related to EVA index proposed by western countries in recent years to evaluate enterprise efficiency. The "added value" here is obviously to increase the EVA (economic added value) of enterprises. At the same time, it is meaningful to replace "improving work quality" with "improving operational efficiency". ③ The work content of internal audit is to evaluate risk management, internal control and governance procedures, rather than just evaluating internal control as proposed before. It can be seen that the scope and content of internal audit have been greatly broadened than before, which reflects the heavier responsibility and higher status of internal audit. ④ Internal audit method: it is a systematic and standardized method. Undoubtedly, in order to accomplish the above important tasks and achieve organizational goals, scientific methods must be adopted, which should be systematic and standardized, rather than scattered and arbitrary. The so-called systematic and standardized methods such as audit sampling method, risk assessment method and internal control method. ⑤ Main functions of internal audit: evaluation and consultation. Through the evaluation and consultation function, we can serve the ultimate goal of the organization-value-added. ⑥ Characteristics of internal audit: independence and objectivity. To accomplish the above tasks, internal audit must be an independent organization, and only an independent organization can make an objective evaluation. Therefore, independence is an objective guarantee.
Third, correctly understand "guaranteed work" and "added value"
International Institute of Internal Auditors defines internal audit as a kind of assurance work and consulting activity, with the goal of adding value to the organization. So how do you understand "guaranteed work" and "added value"? Do some people understand that internal audit will only engage in performance audit and not financial audit in the future? Or does internal audit only have evaluation and consultation functions but no supervision function? The answer should be no for three reasons.
First, continuing to do a good job in financial audit is determined by audit objectives, which is disproved by frequent financial scandals around the world. We believe that modern internal audit must focus on benefit audit, which is the development direction of internal audit, but it does not mean that we only engage in benefit audit without engaging in or giving up financial audit. There is a simple reason. The basic principle of audit tells us that the basic goal of audit is to examine the truthfulness, legality and efficiency of economic activities. Here, people often ignore why the two goals of truth and legality are put in front. In fact, only on the basis of truth and legality can we talk about interests. Financial scandals such as Enron and WorldCom exposed in western countries in the past two years have strongly illustrated this point. Due to the falsehood of accounting information, investors' interests have suffered losses and violations, which not only led to the collapse of the company's share price, but also led to the bankruptcy of the company. There is no enterprise, where there is benefit and where there is added value! This irrefutably proves that internal audit, as one of the internal control mechanisms of enterprises, should take authenticity and legality as the primary goal, strengthen audit supervision and do a good job in financial audit. Therefore, we understand that the definition of "guarantee work" should include two meanings. One is to ensure the authenticity and legitimacy of the accounting information of the unit, and the other is to ensure the realization of the organizational goal-value-added.
Secondly, independence is mainly aimed at financial audit with supervision function. The new definition of internal audit emphasizes the independence of internal audit again. Why should the internal audit department be independent of the audited entity? Because it has to audit the authenticity and compliance of financial revenue and expenditure, it can objectively and fairly express its audit opinions. If financial audit is not carried out, but only benefit audit and evaluation consultation, then internal audit is not an audit or internal audit department, but should be renamed as internal consulting department (institution) or evaluation department. It doesn't matter whether this department is independent or not. It can be placed inside the financial department, under the company office, or under the company decision-making department. It can be seen that the new definition emphasizes the independence of internal audit as always, which shows that even in the internal audit of western developed countries, despite the resources (manpower, time, etc. The proportion of financial audit has been greatly reduced, and the financial audit with supervision function has not been abandoned.