The Research On The Value-added Function Of Internal Audit

Internal audit has developed rapidly with the development of economy. The function, content and range of the internal audit have restricted because the traditional concept of internal audit only positioned to serve the management. In 2001,the term of internal audit has been redefined by the Institute of the Internal Auditors(IIA):Internal auditing is an independent ,objective assurance and consulting activity designed to add value and improve an organization's operations .This new definition shows that internal auditing has entered a new era from guarding against errors and frauds to adding the value of organizations. This makes us to focus on the macro level instead micro level. This also makes the internal audit analyze questions from the macroscopic and strategic perspective, the enterprises governance and the scopes of senior management. Internal audit has played an important role in assisting management ,audit committee , external auditors and other important external related interest parties. However ,internal audit can not receive sufficient attention and its value can not be completely reflected in china, because the awareness of internal audit remains on traditional concept. In addition, with the business process reengineering, highly concerned about risk management and enhance enterprise core competitiveness and efficiency of the cost, internal audit department is faced with a built-in outsourcing embarrassment. Therefore, whether or not internal audit can add value, how to add value, how to measure its value is the problems which the internal audit needed to solve in China.This paper adopts the methods of normal analysis on the basis of business management and audit theory. Firstly, using the value chain theory to analyze internal audit and taking the stakeholder theory to analyse the needs of the stakeholders and the types of the internal audit services. Answered the question that why internal audit can add value. Secondly, from risk management, strategic management and corporate governance to analyze the route of adding value. Answered the question how internal audit add value. Thirdly, by comparing and evaluating the internal audit performance, the paper points out the method of Balance Score Card .Answered the question how to assess the value of internal audit. Finally, the paper proposes the possible way how to enhance the internal audit value.This paper consists of five chapters:Chapter one: Introduction. This section points out research background and significance, status , methods and purpose of structure, the main contributions and weakness. Chapter two: Evolution of internal audit' objective and its theoretical basis. Firstly, we points out the evolution of internal audit objective from prevent fraud to add value. Secondly, we introduce the theoretical basis-Michael Porter's value chain theory and stakeholder theory. We analyze the needs of the stakeholders and the types of the internal audit services.Chapter three: The incremental path of internal audit. Firstly, we providing assurance and consultation are the two forms of value increment of internal audit. Secondly, from risk management, strategic management and corporate governance to analyze the route of adding value.Chapter four: The evaluation of the add value of internal audit. By comparing the methods of self-assessment and the evaluation by stakeholders ,we analyze the method of Balance Score Card, then we draw an conclusion that the method of Balance Score Card is more fit for evaluate the value of internal audit.Chapter five: The way how to enhance the internal audit value.