What is an 'Internal Auditor'

An internal auditor is an employee of a company charged with providing independent and objective evaluations of the company's financial and operational business activities, including its corporate governance. Internal auditors also provide evaluations of operational efficiencies and will usually report to the highest levels of management on how to improve the overall structure and practices of the company.

BREAKING DOWN 'Internal Auditor'

The Institute of Internal Auditors (IIA), established in 1941 with present headquarters in Florida, is the international professional organization that sets standards, guidance, best practices, and code of ethics for the practitioners. The IIA defines internal auditing as "an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes."

Functions of an Internal Auditor

Among the many functions that an internal auditor performs are evaluating the accuracy of controls at business unit levels and recommending improvement; evaluating links among those business units; verifying physical assets and making sure they are protected; ensuring compliance with established business procedures of the firm; and investigating internal fraud or behavior in violation of company policy.

Also, properly-managed publicly-traded companies have internal auditing teams to carry out compliance with outside regulatory agencies such as the SEC and with auditing guidelines as laid out by the Generally Accepted Accounting Principles (GAAP).

Auditing teams report to audit committees at the board level.

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