1.1 Background of the Study
Very large organization and some small ones have found a need for internal audit in addition to an external audit. Internal auditors are employee of the organization and work exclusively for the organization. Their functions partly overlap those of the external auditors and in parts are quite different. The precise functions of external auditors are either laid down by statute or embodied in a letter of engagement. The functions are determined by management and vary greatly from organization to organization. Internal audit defined as an independent appraisal functions established by the management of an organization for the review of the internal control system as a service to the organization. It objectively examines, evaluate, and report on the adequacy of internal control as a contribution to the proper economic, efficient and effective use of resources
The demands on the internal audit departments of insurance organizations have increased significantly in recent years as technology advances, regulation becomes more rigorous, new risks emerge, and companies seek more business insights. Internal audit plays a crucial role in providing assurance on an organization’s governance, risk management, and control processes to help achieve strategic, operational, and financial objectives while balancing compliance objectives and expectations from regulators. Internal audit departments need to leverage an understanding of insurance industry trends, feedback from leadership, regulatory compliance requirements, and available public information to add value to the organization – to optimize internal audit value.
Insurance organizations’ internal audit departments have more demands than many other organizations, namely because they are providing assurance insight and consultation on risk management to an industry that executes risk management as its business. However, because insurance organizations are operating in an environment of ever-increasing change and regulation, internal audit has vast opportunities to improve and provide value optimization.