Audit. Tax. Advisory
3rd Floor, Rhapta Heights, Westlands
+254 720 131 650 / +254 717 558 212 / +254 722 220 013

Efficient management of public sector organisations in Kenya is one of the most important concerns. Most of the developing countries at present, are focussing on the improvement of corporate governance, and Kenya is one of them. This can only be done by including activity-based management system which will enhance the transparency and effectiveness. In this way, it will become easier for any public sector organisations to attain their objectives. The internal audit services in Kenya, for any public sector organisation, is one of the most important elements of a good corporate governance. Apart from the internal auditors, there is the audit committee, external auditors and the Board of Directors, that play a vital role too. To make sure that the corporate governance of a company is strong, there should be total cooperation between different departments of an organisation. Internal audit activity is an extremely critical factor for any organisation. For an organisation to thrive, internal audit services in Kenya, should have precedence over any other activities within the organisation.

The Different Variations of Audit
Before we get into the usefulness of internal audit services in Kenya, let us share a brief about the different variations of audit services. Primarily, there are two types of audits, the external audit, and internal audit.
The external audit is carried on by the auditors outside the organisation and they are appointed by a shareholder vote. The external auditors must be guided by a Certified Public Accountant (CPA) and they report to the shareholders or members outside the governance of the organisation. The external auditors make use of specific formats and management letters for expressing their opinions. The external auditors are constrained from executing an audit very closely and they can only examine the financial aspect of a company. They can only issue an opinion regarding the present financial condition of the company. For the external auditors, they just submit their reports and observations. They don’t have the responsibility to offer suggestions and advice for improvement.
On the other hand, the internal audit services in Kenya include covering all categories of risk, advise on the overall improvement of the organisation, coaching and facilitating to ensure a good governance without undermining the roles and responsibility of the government. The internal auditors are employees of the organisation and they are appointed by the company without any CPA. Thus, they are answerable directly to the management and they can file their reports in any format. Internal auditors can also examine the business practices incorporated by the organisation and offer advice or consulting assistance to the employees. Finally, internal audit services in Kenya or any other countries are conducted throughout the year, while an external audit is conducted at a certain time of a financial year.
What are the Main Elements and Activities Involved in an Internal Audit?
There are three main elements of internal audit services in Kenya or any other countries. The first is the risk assessment. This is the primary element of internal audit services. The risk assessment services include a comprehensive understanding of the exact condition of the organisation. It enables the organisation to identify and evaluate the potential risks and come up with contingency strategies to improve risk management. It cannot be denied that every organisation faces the risk of different sorts. There are risks related to an organisation’s reputation, safety, services supplier failure, market failure, financial security and as well as cybersecurity. The key to good governance is to handle those risks effectively and more efficiently than the competitors. To evaluate how well an organisation is managing the risks, the internal audit services in Kenya or any other countries create internal audit reports of all parts of the organisation. Those reports will be passed directly to the most senior level of management and the audit committee.
The second element of an internal audit is business control. With the help of internal audit, an organisation ensures effective assistance in improving the internal controls. Since the internal audit services in Kenya evaluates the risk, it also enables the auditor to act as a consultant and offer important advice for improving the organisation’s practices. For instance, if a line manager is bothered about a certain responsibility, he/she can discuss the issue with an internal auditor to identify the improvements. Sometimes, identifying the risks and controls become essential while undertaking a new project. Under such circumstances, an internal auditor can help in identifying the project risks and offer suggestions to prevent such risks.
The next element of internal audit services in Kenya is promoting ethics and a good governance process. The internal audit services in Kenya abide by the Code of Ethics that upholds the principles of objectivity, integrity, competency, and confidentiality. With the help of an internal audit company, a organisation will be able to access and make appropriate recommendations to attain its business objectives. Proper ethics can enhance effective communication and control information throughout all the areas of an organisation. This creates a chain of effective activities throughout the organisation.
Now, Coming to the activities of internal audit services in Kenya, it is important to consider an internal auditor as a critical friend. They are the ones who are capable of challenging the present practice, master the best practices and also want to be the director of improvement so that business organisation can achieve its strategic objectives. One of the most important activities of internal audit company is analysing operations and confirming information. To manage valuable organisational resources, it is essential to have a proper system, processes, and people. Internal auditors have to work well with the line managers for reviewing the operations and then report their findings.
The internal auditors are well-versed with the strategic objectives of the organisation and also they are very well accustomed to the sector in which the organisation operates. This is exactly why they have a transparent idea about the operations of any given department whether it can bring profit or incur a loss in the coming future.
The activities of internal auditors are not only restricted to offering assurance to executive management and the auditory committee. Internal audit service doesn’t exclusively manage the risks of an organisation. There are also other people involved in it. For instance, it includes the risk professionals, fraud investigators, compliance officers, security experts and also the quality managers. These are just to name a few. But there is a difference between internal auditors and the risk management professionals. The difference is, the internal auditors are absolutely independent of management operations and they are provided with the complete freedom to offer an unbiased opinion regarding the risks and how they can be managed effectively.
The interesting aspect of the work structure of internal auditors is, they have the complete freedom to work constructively with all the other risk management professionals and assurance providers. This ensures that the audit committee is receiving all the necessary assurance to make an opinion regarding the overall risk management of the organisation. One of the most important features of internal auditing is teamwork and developing effective relationships. It needs to be remembered that the internal audit services in Kenya, in any organisation, should be the best source of internal control and assurance for the CEO and AO.
The Roles and Responsibilities as a Part of Internal Audit
For the public institutions, the activities of internal auditors are primarily of consultants and assurance providers. The focus of such services is to offer effective advice that will add value and improve the management of public organisations without assuming the responsibility. Another important activity of the internal audit services in Kenya is training and professional development that is aimed at improving the skills and knowledge in management, assessing the risks and also monitoring the control systems.
It is extremely important to opt for effective internal audit in public sector because it will protect the interests of the citizens and also strengthen the corporate governance by enhancing the ability of the citizens to hold the public officers accountable. The opinions of auditors are very much important especially in case of promoting equity, credibility and evaluating the appropriate behavior of public sector officials. This, in turn, reduces the chances of public corruption.
There are three different forms of internal audit. They are system audit, performance audit, and compliance audit. The system audit will evaluate the management and also the internal controls that will determine whether they are operating effectively according to the designs of the present environment. For this, the internal auditors have to find the deficiencies and offer remedial actions as early as possible so that the risks don’t hamper the objectives of the business organisation.
Coming to the Performance Audit, it deals with the evaluation of the set of criteria that has been implemented by the organisation and comparing them with the level of achievement of the objectives. The difference of Performance Audit from any other types of internal audit of business is it is focused on the performance of the business organisation, on the projects and the programs undertaken by the organisation.
The role of Performance audit also includes investigating the systems and procedures for controlling the overall performance of the company. In simple terms, enhancing the efficiency and effectiveness of the overall performance of the business organisation is the sole purpose of internal audit of businesses.
The third form of internal audit services in Kenya is the compliance audit. These audits are conducted because there is a certain policy or statutory requirement by the business organisation. But this doesn’t mean that this kind of internal audit services in Kenya will just check a certain system or department and finalize the audit. It is imperative to consider the timing before finalizing the statutory compliance audit. A good example of a compliance audit is the annual executive compensation audit that is done in the publicly-traded companies.
The compliance audit also ensures that proper approvals and processes are in place to ensure executive compensation and also control the disbursement or any other transfer of compensation. This part of internal audit services in Kenya is specifically done for regulatory purposes, but the objective still remains the same, that is, to ensure adequate control throughout the internal process.
These are the primary forms of internal audit of businesses. Apart from these, the other forms of internal audit services in Kenya are the financial audit, information-technology audits, and follow-up audit. With the help of financial audit services, it becomes easier to access the validity and also the correctness of a budgeting statement. It helps to estimate the adequacy of the related internal controls.
The objective of a follow-up audit is revisiting the past audit’s recommendations and suggestions by the management. This will help in determining whether the corrective actions are working or whether the situations have changed to come up with different actions. Finally, the information-technology audits ensure that the system processing controls, physical security, data security, contingency planning, systems development processes and the system requirements are fulfilled.
Importance of Internal Audit Services in Kenya for Effective Corporate Governance
It cannot be denied that the role of internal audit services in Kenya is becoming more and more popular for creating much better corporate governance. With the help of effective internal audit services in Kenya, it becomes easier for the board in performing efficient corporate governance duties. Internal audit function is a cornerstone of corporate governance which helps the board in monitoring its effectiveness. An internal audit company helps a business organisation in meeting the corporate governance expectations. Three factors are essential for a good corporate governance. They are, formatting strategies for handling business risks, managing the internal controls effectively and enhancing the company performances.
It is expected that the board will come up with effective risk management strategies which will eliminate potential threats and business risks. The board needs to ensure that adequate internal controls are adopted for every level of risk that can possibly occur. The internal audit services in Kenya will help any business organisation and the board in dealing with implementation of risk management systems. There should be certain legislation like Sarbanes Oxley Act (2002) that will reinforce the internal audit of businesses in different organisations. With the growing importance of internal audit services in Kenya for good corporate governance, implementing legislation can fasten the usage of internal audits for both small and large scale business organisations. It is true that a legislation may not specifically address the roles of management or board in implementing a good corporate governance, but it will offer an expanded accountability towards stakeholders, including the audit committee.
This, in turn, will create opportunities for expansion of internal audit services in Kenya. The provision of additional services can be initiated by the board as well as the management to make sure that the accountability requirements are met completely met. Considering the close relationship between the management and the audit committee, the internal audit reports can raise issues related to the credibility and integrity of the certain department. The reason is, with the increasing opportunities and responsibilities of internal audit of businesses, the accountability, objectivity, and independence also increase. Now, this can cause a hindrance to the overall performance of an organisation. The reason is, broadened internal audit reports within the changing business environment combined with the increasing economic condition and globalization, can create pressure on the overall functionality. This is where it might jeopardize the independence.
Internal audit services in Kenya should be able to set up the right priorities. To do this, it is essential for them to focus on the high-risk areas. To ensure a good governance, it is important for the chief audit executive to report to senior management and the board regarding the plan, activity, and results of the internal audit services in Kenya. The internal audit reports should also include potential risk exposures, control issues, governance issues and other factors requested by the senior management and the board. To ensure a good governance, it is important to offer quality assurance in internal audit services in Kenya. The internal audit services in Kenya provided by Ronald’s & Associates comes with quality assurance and improvement program to deal with any implications for the company or its stakeholders.
Apart from that, a good corporate governance in a business organisation requires the internal audit services in Kenya to have an updated set of policies, procedures, and performance measures for executing an impeccable internal audit. The internal audit services in Kenya should continuously improve. It is evident that the internal audit services in Kenya act as the first and foremost line of defense for any business organisation. The failure of an internal audit company can lead to the failure of the business organisation itself. This is exactly why you need to consider the best internal audit services in Kenya. Ronald’s & Associates internal audit services in Kenya ensure that they follow the best and the most updated practices to ensure complete security and excellent corporate governance for business organisations.