His screening and evaluation of the operations of an organization makes the work of the external auditor easier. It cuts the cost of the external audit which otherwise has to conduct all audit examinations and tests on his own in order to arrive at his audit conclusions. By relying on the audit trails continuously conducted by the internal auditor, the external auditor could complete his audit examinations on time by conducting only the relevant sample tests. In this sense too, an internal auditor is a necessary element in modern organizations. BIS Review 143/2007  1  Internal auditor or management auditor? Over the years, the scope of the internal audit has expanded to cover new areas which have become important to an organization from the point of view of efficiency and productivity. Modern business is fiercely competitive and, unless an organization acquires a competitive edge over its rivals, it would not be able to continue in business. This is specifically relevant to banking institutions. Hence, in addition to the normal routine surveillance over financial matters, internal auditor was required to comment on the efficiency of operations as well. This involved his examination of processes, systems and methods to gauge whether the money spent by a business really makes a contribution to the business in return. The new work-load changed the title of the internal auditor to management auditor. He was, therefore, required to function as an in-house management consultant and advisor to the top management of organizations.
Today, we do not make any distinction between “internal audit” and “management audit”. Whatever the term we use to call him, an internal auditor has to function as a management auditor as well. New challenges for internal auditors The expansion of banking business both horizontally and vertically over the years has posed new challenges to the internal auditor. This expansion has resulted in creating giant banking holding companies encompassing almost all areas of financial services. A bank which was confined only to borrowing and lending some six to seven decades ago is now a universal bank that provides all types of financial services to its customers. They may do it through different units or departments set up under one umbrella or through the establishment of a host of associate and subsidiary companies under one holding company. An internal auditor in a bank, therefore, cannot simply confine his work only to the main business of banking. Since there are cross-border risks involving different segments of a banking holding company, he now has to expand his area of operation to cover the entire business as a single entity. This adds not only a new work-load, but also a new challenge to an internal auditor. It behooves on the auditor to acquire new knowledge and skills to handle the job effectively. Hence, an internal auditor today has to be an all-rounder in banking and associated financial business, if he is to do his job effectively.