Expanded Summary

Internal audit is of great importance as it verifies the accuracy and reliability of financial statements. Credibility is the most important requirement for business success. Therefore, if there is corruption or possible financial violations in the company, this may be the reason for its final failure and closure. The basis for this is that partners and investors can easily leave the company, which will lead to its instability and, ultimately, dissolution.

However, through an internal audit, the companys management can determine whether the companys finances are at risk or whether everything is in order. Consequently, this helps the company gain trust and investment from a number of stakeholders.

Internal audit is extremely important for the companys success, as it minimizes risks. The internal audit takes into account all the risks identified in the company. In addition, it checks whether the companys risk mitigation strategy is working as expected and planned. The audit report helps to determine whether there are unresolved problems and deficiencies in the company. Also, the report presents the necessary information to solve the mentioned problems.

The results of the internal audit identified deficiencies, and recommendations are reflected in the report, which should include 5 elements, namely: Criteria, Condition, Cause, Consequences, and Corrective Action

The first of the 5 Cs is criteria. Regarding the criteria component, the audit report should outline the particular issue or issues identified, the reasons why the internal audit is necessary, whether the internal audit is done in preparation for a forthcoming external audit, the person who requested the audit, and why the audit was requested.

The second of the 5 Cs is the condition; the condition outlines how the issue or issues relate to the companys expectations and targets, whether the issue was a result of a broken policy, a benchmark not met, or another unsatisfied condition. Furthermore, the condition element considers whether the organization is confident that no particular issue exists or they believe that a certain issue exists. The third component is the cause and it outlines why the issue arose, the people involved in the issue, the broken processes, and how the problem could have been avoided.

The consequence is the fourth element of the 5 Cs. Consequence outlines the issue’s outcome, whether the issues identified are limited only to internal matters, whether there are risks of external significance and the financial implications of the identified issues.

The final element of the 5 Cs is the corrective action (CA). The CA outlines what the company can do to fix or resolve the issue, the specific steps that the management can take to resolve the problem, and the type of review or monitoring that will transpire after solutions have been initiated to ensure a fix has been executed.

Furthermore, a good or high-quality internal audit report must possess five features or characteristics. The first characteristic is objectivity; Oussii & Taktak (2018) argue that a good internal audit report must have objectivity in that, the opinions and comments that the internal auditor expresses in the report must be unbiased and objective. Clarity is the second feature of a high-quality internal audit report; clarity implies that the language that the auditor has used in the report is not only straightforward. Clarity is important in an audit report because it ensures that the report is understood by both novices and experts. Accuracy is also an important feature of a high-quality audit report. Based on the accuracy feature, the information that is contained in an internal audit report must be accurate and precise and should not have any type of errors, including commission and omission errors. The accuracy of an audit report is important since it ensures that the client can use the information contained in the report to make informed decisions. Furthermore, an internal auditor should ensure that the report meets the brevity characteristic or feature. Regarding the brevity feature, the internal auditor must ensure that the audit report is concise. Finally, the internal auditor must ensure that the internal audit report meets the timeliness feature. Based on the timeliness feature, the internal auditor must ensure that the audit report is released right away immediately after the audit has been concluded; within less than a month.

The internal audit report should meet a number of criteria, in particular, the report should be objective, and the given recommendations should be neutral.

Accuracy is also important, as the report should not contain material errors, and the information contained in the report should be concise and understandable for both professionals and people without financial knowledge. The report should also be submitted in a timely manner so that the information contained in it can be used to make quick and effective management decisions.

Keywords: Internal Audit, Internal Audit report, 5 C criteria, Internal Audit program, Internal Control, Internal Audit efficiency