The Role Of Internal Audit In Corporate Governance

There are principal-agent relationships between shareholders and managers of the company, and shareholders supervise the business activities of the operators by selecting directors. Shareholders, directors and operators become the important subjects of corporate governance. The reports on the performance of entrusted financial responsibilities and the reports of entrusted management responsibilities are important for information asymmetry between the trustee and the trustee. In terms of the contracts between the trustee and the client, the observable variables of the entrusted management responsibility and the observable variables of the performance of the entrusted financial responsibility are conducive to the fulfillment of the contract.

Modern internal audit is a comprehensive audit including financial audit and management audit. It is necessary to examine the performance of entrusted financial responsibility and entrusted management responsibility, so as to ensure that the trustee can act according to the interests of the principal, so as to narrow the interests gap between the principal and the trustee.

Internal audit plays a role not only in the confirmation of financial accounting information, but also in the recognition of financial accounting information.

Play a role, and ultimately reduce paction costs and agency costs.

In modern corporate system, there is not only the principal-agent relationship between shareholders, board of directors and managers, but also the principal-agent relationship between employees and managers or corporate groups at the operational level. This is manifested in the fact that managers or corporate collective decisions are implemented hierarchically, and the information of all levels of the company is reported or pmitted down to level.

In order to ensure the safety of the company's property and the implementation of its management decisions at all levels, it is not enough to rely solely on the supervision of the shareholders or the board of directors.

Although it plays a certain role in supervision, it is necessary for a department to feedback the problems in internal control timely and accurately to the top managers in order to ensure the efficiency of the operation of internal control.

Internal audit is an effective way to evaluate internal control, because internal audit institutions can discover defects and loopholes in the implementation process of internal control system in accordance with their independence, understanding of the company's situation and accumulated experience in long-term audit work. Through analyzing the causes and effects of the problems, the internal audit system can put forward practical and constructive suggestions and measures to improve the internal control of the company.

Internal audit can not only play a guarantee role in supervision and checks and balances, but also make full use of the functions of advisory services and explore ways to enhance company value by taking advantage of all the business reviews conducted by the company, which is consistent with the value of corporate governance.

In fact, the fundamental driving force for the development of internal auditing is to increase value, which is cost sensitive.

The management of a company requires every member to create value for the organization.

As the objective of internal audit, it has injected vitality into the internal audit to bring it closer to the value chain of the organization, and the high quality services it provides will be affirmed.

Most types of audits, including compliance auditing, can create value for organizations by enabling them to keep abreast of the effectiveness of the control system.

Modern internal audit can comprehensively evaluate and predict the effectiveness of risk management, control and governance process through systematic and professional methods, and put forward relevant advice and improvement measures to the top management of the company, thereby increasing the value of the company.

On the other hand, the existence of internal audit will objectively act as a deterrent to managers and other functional departments in the organization, so that they will have to maintain a good control system and strive to improve their performance.

This passive "self-discipline" behavior objectively leads to an increase in organization value.

Therefore, paying attention to the construction of the internal control system, improving and perfecting the internal audit has become a pressing matter of the moment, and is also based on the thinking of corporate governance.