Auditing Complexity: A Comprehensive Analysis of Process Development in Audit Committee, Internal Audit, and External Audit

In today's complex business landscape, transparency and accountability are considered crucial elements for success and sustainability.

In order to maintain the organizational progress, companies are required to integrate audit committee, internal audit, and external audit into their operational activities in order to receive oversight that assures and validates their financial reporting and functional processes. Comprised of independent directors, audit committee oversees the financial reporting records, internal controls, and the external audit charges. Through providing an additional layer of oversight, audit committee can aptly mitigate the risks resulting from the financial fraudulent activities, making the company's systems comply with laws and regulations.

Internal audit serves as a proactive mechanism that evaluates and improves the company’s internal control techniques. Through conducting regular assessments that involve all operational activities, risk management, and policies and regulations, internal audit can successfully contribute to enhancing transparency and accountability. Through their independent and objective evaluations, internal auditors provide valuable insights that enable organizations to strengthen their governance and risk management practices. External audit, conducted by independent certified public accountants, is essential for providing assurance regarding the financial reporting accuracy. The audit committee provides strategic oversight and guidance to both internal and external audit functions, ensuring alignment with organizational objectives and regulatory requirements. The internal audit complements the audit committee functions, as it continuously monitors and assesses the internal control processes, risk management, and compliance. External audit, in turn, provides an independent and objective validation, bolstering the overall transparency and accountability, which the organization currently holds.

Understanding the audit committee mission, besides identifying the roles and tasks (Ge & McVay, 2005), which the internal audit and external audit undertake (Ashbaugh-Skaife et al., 2008), is essential for everyone working in companies that partially apply auditing processes, which verify the fairness in the financial reporting and the regulatory compliance (Doyle et al., 2006).

It is recognized that audit committee is considered a crucial element of corporate governance (Abbott et al., 2004), responsible for inspecting and administering the financial reporting procedure (DeZoort & Salterio, 2001), ensuring that the internal control systems are efficiently carried out (Raghunandan et al., 2001). In accordance, the audit committee primary role is principally related to provide independent and objective oversight on the company's internal control, and audit functions. The audit committee members are typically drawn from the company's board of directors and are required to operationalize knowledge that involves financial matters and accounting principles.