Decentralized operational auditing - the effective use of the internal audit function

As indicated in AICPA Audit Standard 55 and Audit Standard 60, the reliability of a firm's internal control structure is critical to both management and the external auditors. When these greater expectations are added to the increased risks of control breakdowns in today's decentralized business environment, they result in unprecedented demands on the internal audit function. Historically, internal auditors have performed tasks that mainly centered on the measurement and evaluation of accounting and financial controls. Today, they are responsible for managing a broader, more diverse internal audit function that includes conducting operational audits as well as direct reporting to or membership on the audit committee. Two characteristics emerge as being essential to auditors' success in their expanded role: 1. the ability to understand and effectively participate in management's decision-making process, and 2. knowledge and understanding of the total information system, both formal and informal.