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The Investigating of Internal Auditing Quality Control ZHANG Liying1, DU Xiaorong2 1. School of Accounting, Hebei University of Economics and Business, P.R. China, 050061 2. School of Graduates, Hebei University of Economics and Business, China, 050061 [email protected]

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Abstract Audit quality is the lifeline of the audit, it will directly affect the reputation of the audit. One of the significant issues in current areas of audit work is how to strengthen the quality control of internal auditing and to improve the quality of internal auditing. The meaning and elements of the quality control of the internal auditing has been mentioned at the beginning of the article. Firstly, the article summarizes the elements of the quality control of internal auditing. In addition, it has been discussed about quality control problems of internal auditing from four aspects, that is, the control system, audit settings, audit approach and supervision. Finally, it has been investigated several measures to solve the problems of internal auditing quality control in the article, that is, the audit institutions, monitoring system, audit techniques, external evaluation, supervision of the main. It is hoped that these measures mentioned in this article could help to establish an effective quality control system of internal control. Keywords: Internal Auditing, Quality Control, Element, Improvement

1 Introduction Our citizens are concerned more about the internal auditing of companies as well as the company’s external auditing because of the exposure of well-known corporate scandal. Meanwhile, the business community is not only increasingly concerned about how to build a high-quality and effective internal audit institutions in monitoring business conditions, but also to promote the goals of the organization and to increase value to the organization. Therefore, only did our internal auditing profession recognize about the significance of quality of internal auditing and strengthen the internal auditing quality control in the current complex environment can we seek survival and development way.

2 The Meaning and Characteristics of Internal Auditing Quality Control Quality control of internal auditing consists of implement policies and procedures which established by the internal audit agencies in order to achieve the audit objective, standardized audit reports, clear responsibility of auditors and to ensure that audit quality in line with regulatory requirements. It includes the control of an internal audit program, internal audit evidence, internal audit journal, papers of internal audit, internal audit reports, internal audit files, besides, the assess of the effectiveness of the organization's risk management, internal control, the process of governance should also be included in the quality control of internal auditing. Internal audit quality control system has these following features: 2.1 Systemic The quality control of internal auditing results from the combines of a series of factors. Firstly, the operation of the internal auditing quality control should be influenced by audit environment, audit standards, audit methods and other factors. In addition, many factors play a role on the premise that the internal audit quality control procedures operating effectively. Various components can be combined according to certain orderly control. Finally, multi-level communication and public participation should also be included in the quality control of internal auditing.

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2.2 Consistency Internal audit and audit staff should be in accordance with the task of "internal auditing standards" and "internal audit staff of professional ethics" of the regulations. These norms could measure the implementation of internal audit quality control standards. 2.3 Uncertainty Even if the internal auditing standards to determine a uniform standard of quality audit, internal audit business is relatively complicated for the reason that different people for a specific judge on the quality of internal audit. 2.4 Restrictive Improving the quality of internal audit will be subjected to internal audit staff of professional quality limit while improving the quality of internal audit is to the audit cost of paying for the price. The audit cost and the ability to supply services subject to audit. 2.5 Potential Internal audit responsibilities constitute the premise of the existence of audit quality control. In certain period of time, the potential problems of audit quality depend much on the responsibilities of internal audit staff and the size of audit responsibilities. The problems of audit quality would come to reality only when the auditors are responsible for substantial losses in the problems of audit quality. 2.6 Controllable As long as the internal auditors to maintain professional care and professional ethics, to use professional judgments, to implement reasonable audit procedures and methods, we can effectively improve the quality of internal audit.

3 The Elements of Internal Auditing Quality Control The quality control of internal control is a system, it contains the following aspects: 3.1 Internal audit environment Internal audit quality control environment includes external environment and internal environment. The external environment of internal auditing quality control mainly refers to economic and financial environment, legal environment, economic operation and regulatory mechanisms, which the enterprise itself can not be changed, while would have a significant impact on internal audit work factors. Internal environment, including the company's corporate culture, top management philosophy, which can be changed through the efforts of enterprises, but also for the realization of the value of internal audit has an important influence. 3.2 Independence of internal auditing Internal audit institutions and internal audit staff is the foundation of internal audit work, it is independent of internal audit for an important role. Internal audit institutions and internal audit staff is relatively independent of internal audit work for an important role, it constitutes the foundation of internal audit work. Internal audit institutions and internal audit staff to maintain the absolute independence is impossible for the reason that it is an integral part, so it is emphasized the importance of internal audit institutions and internal audit staff to maintain the relative independence. Only to maintain independent, can we make a compliant and effective review to the enterprise’s internal work and quality control of internal auditing objectively and fairly.

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3.3 Internal audit staff of professional quality In addition to a good work ethic and solid technical expertise, internal audit staff should also be familiar with financial management, information technology and other related disciplines. Internal audit staff should have good communication skills and emphasis on teamwork. Enterprises should establish perfect internal audit staff supervision and incentives, and should also pay attention to the internal audit staff follow-up education and encourage their participation in the training. 3.4 Regulatory system of internal audit Business-to-internal audit work should be to establish a complete monitoring system. Only high-quality regulatory mechanism to ensure the internal audit staff be strictly adhere to professional ethics, and to ensure the audit results objectivity and fairness. Only complete accountability mechanisms can ensure internal audit work carried out efficiently and smoothly. 3.5 Internal audit techniques and methods Internal audit techniques and methods for quality control of internal auditing have extremely important implications. Today's society has entered the information age, computer technology and network applications are increasingly common, especially in accounting information systems and office computer information systems quickly spread. Computerized accounting, project budget and final accounts software and office automation software is widely used. Internal auditing should be changed from the traditional internal audit to check the reports, books of technical analysis techniques to evaluate new methods of development, including the latest results of the use of internal evaluation, statistical sampling, mathematical statistics and other digital processing technology and management science and economics in order to further enhance the internal audit technology, the progressive realization of the modernization of internal audit, to ensure audit quality, to reduce audit risk and improve audit efficiency.

4 The Status of Internal Audit Quality Control in China Various factors could have an impact on the quality of internal auditing, it has been focused on several factors in this paper, such as follows: 4.1 The internal auditing quality control system is not perfect Sound and comprehensive quality control system could indemnify internal audit staff to comply with laws and regulations, professional ethics and the protection of the internal audit procedures. Only the introduction of Internal Audit Association of China, "specific guidelines on the 19th of internal audit internal audit quality control" refers to the internal auditing quality control system, but not mandatory. Besides, many units did not develop an internal audit charter, did not develop an internal audit quality control management practices and standardized business process control standards, the system is imperfect, leading to no concrete measure of the quality of internal audit standards. 4.2 Unreasonable to set the internal audit institutions The internal audit agency under varies patterns in different corporations. Some of the internal audit agency is located in the personnel department; some of the internal audit agency is located in the office; some of the internal audit institutions and supervision departments combined; some did not even set up a full-time audit positions but by the other part-time staff positions; there is also a part-time person in charge of accounting and auditing is responsible for, and this seems set up an independent internal audit institutions or internal audit full-time staff, but still at work listening to the original in-service job sector leadership arrangements. The above situation to a large extent affect the objectivity of the internal audit staff to audit the business.

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4.3 Backward audit approach The concept of the internal audit staff failed to change, while the internal auditing in a large number of countries has turned to risk management audit and the audit strategy in the case, our model still accounts for the internal audit approach as mainly based audit approach, risk perceptions more indifferent, less consideration of audit risk control factors, let alone the use of risk-based audit model; sampling techniques with the use of more subjective judgments of internal audit staff and experience, the use of statistical sampling techniques is lacking; lack of audit methodology and our experience and refining lack of internal audit and internal audit bodies among the advanced exchange of experience. 4.4 Lack of internal audit quality control oversight of the main The Board's responsibilities is to guide the internal audit unit to monitor the quality of internal audit work, with the exception of a small number of listed companies in accordance with the requirements of the Commission established an audit committee, almost all business units, most of the non-listed companies and does not have an audit committee, even if established, many are non-existent, did not play its due role. At the same time, "Audit Law" stipulates that the internal audit work to audit institutions responsible for internal audit institutions of the obligation to bear the guidance and supervision, but now the task of national re-audit, the audit department superiors, staff is less arduous tasks to attend to on the internal audit unit of the supervision and guidance. For Industry Association, since its inception, China Association of Internal Audit make great contributions to the development of internal auditing, it promulgated a code of ethics and internal auditing standards, but the Institute of Internal Auditors has yet to industry self-regulation, for violation of professional ethics and professional internal audit discipline has not yet issued penalties.

5 Measures to Improve Internal Auditing Quality Control For the internal auditing quality control problems listed in the article, efforts should be made such as the following areas: 5.1 A reasonable set of internal audit institutions Set the internal audit organization is the basis of internal audit work and plays a key role in audit work. In general, the higher of the organization of internal audit position and set level, the greater its independence, the role of internal audit the more fully realized. Anglo-American corporate governance structure that the Audit Committee's internal audit agency under the leadership of two-way reporting system is a modern corporate governance and internal audit agency under the ideal organizational model, that is, while internal audit department is responsible for the management and board of directors and reports: in administrative, by the senior vice president and chief financial officer (CFO) leadership; in business, accept the supervision of the Audit Committee. Firstly, the Audit Committee is helpful to improve the independence of audit institutions, to make the scope of the audit work from the management constraints, to a certain extent, it would be helpful for audit staff to subject to internal audit management to get rid of the embarrassing situation; besides, significant issues can be resolved in a timely manner through direct contact with high-level which achieves a smooth information channel; Finally, to meet the different levels of need for internal audit functions, the Audit Committee serves the Board of Directors while internal audit organizations provide services to management, both with a common goal, that is, to conduct an independent evaluation to internal control and financial information systems, to ensure internal control operate effectively and the reliability of financial information, to reduce information asymmetry in the board of directors and management. 5.2 Strengthen the internal audit supervision Audit institutions and the higher authorities should perform its regulatory duties, for violating rules of professional ethics and internal audit internal audit staff should be punished severely discipline; Audit 223

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Association should strengthen self-discipline, for serious breaches of the internal audit staff should refer to the CPA regulatory measures, internal audit qualification certificate be revoked and other penalties. 5.3 Improve the technical quality control of internal auditing Post-audit of internal audit should break through the traditional way. Internal audit work should be in business to prevention and control of matter and thus can play an active role in the internal control of the whole process as well as all aspects of supervision evaluation. The internal audit staff should be combined with the current environment and conditions for full use of information technology audit of software development standards to enhance the internal audit techniques and standards. 5.4 Enhance the quality of the external evaluation of the internal audit External evaluation is an independent external agency or group of inspectors to ensure the quality of internal audit to check the project, external evaluation is intended to evaluate the quality of the operation of the internal audit, external evaluation of institutions for internal audit and other than the person business management and other internal audit work required to provide information to other independent quality assurance. 5.5 Improve the internal audit quality control oversight of the main Long-term practice shows that a two-way reporting system of internal audit is an organizational model in western countries which internal audit under the leadership of the Audit Committee. In this mode, in addition to the business needs of the Audit Committee's supervision, the internal audit department but also to the management and board of directors and reporting. In view of this reason, the internal audit agency should be set according to its legal status, property rights and economic independence of the actual situation, selecting the desired level of its internal audit function to adapt the model. The establishment of internal audit organizations must ensure that its relative independence and authority to ensure the fulfillment of its primary responsibilities.

6 Conclusion Generally speaking, the internal audit is a quality control system, certain internal audit quality results from many affecting factors. It is not an easy task to improve the quality of internal auditing but a systematic project, and only by establishing a comprehensive quality control of internal auditing from the control of the organization, control means and the control of process did the quality control of internal auditing produce substantive results.

References [1]. C.William Thomas Emerson O.Henke, Auditing Theory and Practice [M], Kent Publishing Company, 1983 56P [2]. Bruce W Fraser. Setting the Standard. The Internal auditor. Vol.62, Apr,2005:pg. 40 [3]. Yves Gendron, Jean Bedard, Maurice Gosselin. Getting Inside the Black Box: A Field Study of Practices in “Effective” Audit Committees. Auditing. Vol.23, Mar. 2004:pg.9 [4]. Eelco R van Wijk. Lffy Independence. The Internal Auditor. Vol 61,Oct 2004:pg.81

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