The internal audit function is essential for keeping the operations of the organization effective and rife with sound governance practices while managing risks efficiently. Quality Assurance Review is an integral part of the audit function, which assesses the effectiveness of internal audits' processes and methodologies. Effective QAR ensures not only compliance by internal audits with regulatory standards but also value addition to the organization through improvement in internal controls, mitigation of risks, and enhancement of organizational performance.

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Purpose of Internal Audit Quality Assurance Review
The quality review is aimed at determining the adequacy of the functioning of the internal audit function and identifying strengths and weaknesses. This determines whether the audit function meets the standards set by an industry body like the Institute of Internal Auditors. Quality reviews ensure that the audit teams continue to operate appropriately, independently, and objectively when conducted regularly.

Key objectives of the QAR include:

• Reviewing conformity with auditing standards and regulatory stipulations.
• Reviewing the effectiveness and efficiency of internal audit processes.
• Audit planning, execution, and reporting in areas of improvement.
• Reviewing a plan to give advice on the performance of the audit department.
• Building the confidence of stakeholders in the work being audited.

Types of Quality Assurance Reviews
Generally, there are three types of QARs, each differing in their level of rigor and detail:

• Self-assessment with independent validation:
  This type of review comprises an internal review of the audit team, while validation is done by a third party independent on the panel but often a third-party external consultant. It is more informal than the full external review but still useful in knowing how the department has been performing.

• Full External Review:
  This is a third-party review. This review gives comprehensive recommendations about the audit function. Organizations looking for an objective, thorough analysis typically prefer these types of reviews.

• Continued Internal Monitoring:
  This type is non-statutory and involves monitoring the performance of the audit department as part of regular operational reviews. It is not formalized but ensures that any problems are dealt with immediately.

Main Elements of a Quality Assurance Review Report
The report of QAR usually encompasses a number of essential elements of the internal audit function. These include:

• Audit Governance:
  The review should focus on the internal audit structure and reporting lines, ensuring that appropriate organizational independence and authority exist. It should also determine if there is direct access to the audit committee or board of directors for the audit team.

• Risk Assessment and Audit Planning:
  The QAR measures the risks posed in the audit estimations. It examines the risk assessment approach of the department to know whether there has been an emphasis on high-risk areas and whether the audit plan is tied to the strategic organizational objectives. In turn, an effective risk-based audit allows optimal use of resources and enables the audit team to provide maximum value.

• Audit Execution:
  The review evaluates the methodologies, tools, and techniques applied by the audit team while conducting an audit. It also checks whether the audits are conducted in accordance with professional standards and regulatory requirements.

• Reporting and Communication:
  This QAR reviews the clarity of the audit report, the effectiveness of communication with stakeholders, and whether the audit team delivers timely, relevant, and action-oriented information to management and the audit committee.

• Follow-up and Remediation:
  The QAR checks the follow-up process, ensuring that management has taken corrective action and the audit team verifies the effectiveness of these actions.

• Staffing and Competency:
  The review checks whether the team of auditors has the skills, know-how, and expertise to work in this profession. It also assesses the department’s approach to training and professional development to ensure that staff is updated on the latest audit practices and industry trends.

• Use of Technology:
  Internal audits increasingly utilize technology to improve their efficiency and effectiveness. QAR assesses whether the department employs data analytics, automation tools, and audit management software towards improving audit processes.

Best Practices to Conduct a QAR
Conducting a QAR successfully requires a systematic and structured approach. Here are some best practices that organizations can follow:

• Engage Experienced Reviewers:
  In both self-assessments and complete external reviews, it is important that reviewers are aware of internal audit practices as well as relevant industry standards. An independent reviewer will be objective and add value to a review.

• Leverage Industry Standards:
  The IIA's guiding principles for standard auditing practices should serve as the QAR's foundation. These standards ensure full coverage and conformity to the best practices in auditing.

• Communication with Stakeholders:
  Before and after the review, there must be internal communication with stakeholders, especially the audit committee, senior management, and external auditors. This ensures alignment on expectations and areas of focus for the review.

• Emphasis on Continual Improvement:
  The QAR is primarily meant to provide input for continual improvement in the internal audit department. Reviews should offer actionable recommendations for improving performance and enhancing value from the audit function.

• Schedule Regular Reviews:
  High-performing organizations are required to perform QARs at fixed intervals—usually every three to five years—to keep the internal audit department aligned with best practices and responsive to changes in the regulatory environment or risk profile of the organization.

Quality Assurance Reviews and Technology
In recent years, technology has changed the way internal audits are conducted, and the QAR is no exception. Advanced software platforms such as Axonator facilitate smoother workflows for audit teams, enable automation of routine tasks, and allow for the analysis of large volumes of data. Continuous monitoring is also facilitated through such tools, which may provide real-time insights into the performance of the audit function.

Data analytics tools allow audit teams to recognize patterns and trends in organizational data, further developing a more risk-based approach in auditing. Technology also enhances the process of QAR, making internal auditing more effective and identifying areas that require greater management attention.

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About Axonator Inc:

At Axonator, our vision is simple yet powerful: to enable the world on mobile. We envision a future where every aspect of business and society is seamlessly connected through mobile devices. Our mission is to empower businesses worldwide to leverage the full potential of mobile technology, transforming the way they operate, communicate, and collaborate.

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