By: Aysha Rashed AlHamrani AlShamsi Internal Auditor in Ajman Tourism Development Department

Edited by: Assem Naser


Frousting fundemental

At the beginning, when companies started noticing an increased rate of Fraud incident as result of lack of attention to the
control environment and the weak design and effectiveness of internal controls in the organizations, it was really necessary
to create “audit fieldwork” in the private and public sectors. Previously, the audit concept was difficult to comprehend as it
was viewed as a control and monitoring function.

This continued until the modern management science started to develop and the establishment of the Institute of internal auditors in the early 1940’s. the profession started to move from its policing role into the advisory and business partner
role.  This was followed by the development of many standards to govern and guide the profession. In addition further alterations to the definition of internal audit were made to properly position the profession within the organization and ensure that people start to realize the importance of auditor and the internal audit function became an integral part of the various types of organizations. However, as the global financial crisis hits globally, board of director’s objective was to increase the organizational profit in order to avoid bankruptcy. Even though some members of the board of directors were auditors.

Therefore, organizations started to return back to the old days were audit and control processes were not that important as
customer’s satisfaction should be the top in the organization concerns. The customer’s satisfaction theory states that there is a direct relationship between customer’s satisfactions and profit. The internal audit function through its disciplined approach enables the management to understand the risk profile of the various processes within the organization, and with the properly
designed audit procedures highlight control gaps, and ultimately mitigate controls through the recommendation to enhance or introduce the right controls. However due to the inherent limitation of the internal audit resources the internal audit functions are not able to cope with the all the operational risks that evolve as a result of the organizations operations,
Due to this inherent limitation, and in order to for the internal audit function to fully assume its strategic roles within the
organization the practices started shifting heavily from simply detecting errors to the assessment of risk management
practices and that’s when the new definition of internal audit evolved to be an independent, objective assurance
and consulting activity designed to add value and improve an organization’s operations…” The word “adding value”
has been identified and explained by many articles or auditors where it can increase the business profitability and reduce the
risks in the projects invested or resolve issues that are facing the organizations. Giving the example of the banks before the financial crisis where they were providing loans to the customers in order to increase their profits through the loan rate without even following the bank’s laws and regulations, which ended up with several bankruptcy cases in the banking sector.

Most of the board of directors are mainly concerned with closing the audit comments without keeping in mind “how can the comments not be repeated from the sections?” Even if the comments are repeated in future, most of them will instruct the department to close it without noticing that it was the same comment written in the previous report. I’m not indicating that profit is not important, it is important and even auditors are checking the financial statements in order to analyze the revenue and costs. However, will the profit levels achieved be sustainable if the organizations’ s control environment and governance practices fails operate?
And if that is the case, isn’t it suitable to embed the implementation of internal audit recommendations within the key
performance indicators of the operational department. It is a question that needs to be carefully thought of, and answered
by the executive management and might reshape the role of internal audit in the future.