The Value-added Function Of Internal Auditing From The Angle Of Corporate Governance

On the base of Agency Theory, we analyze the function of internal auditing in corporategovernance. In this process, we research from five aspects, which are object, scope, approach onproviding and resource equipment, in order to illustrate how internal auditing could add value.There are many differences between the internal auditing with value-added function and othertypes. Former has more objects to serve, pays more attention to risk management, and providesmore products which include enhancing internal control, deterring effect, reducing risk,improving operation and the environment of corporate governance, lessen cost and culturedesign etc. In addition, it provides compliance auditing, assurance on control, risk assessmentand control, and consulting services. Besides, it has more requirements on material resources.According to status quo, we found there are many problems in our internal auditing. First,law system has limitation. Second, the scope is confined, the function is simplex, while theinternal auditors have low-level education background and the relationship between auditor andothers in the firm is unharmonious. Finally, during the process of auditing, account-basedauditing is mostly focused. All of these problems are caused by two reasons—exterior andinherent. The former one is the aspect on motivation and environment, and latter one is onrequirement, conception, work efficiency, audit relationship and corporate governance structure.They all affect the improvement on value-added ability of internal auditing.In the end, this paper puts forward a proposal to improve the value-added ability of internalauditing in our firms. First, strengthen legal system, change the functions, broaden the scope andinnovate the auditing method. Second, the firm should set up an internal auditing department;relate the internal auditing to corporate governance and build harmonious relationship withothers in order to improve status and authority. Finally, optimized labor organization, strengthentrade management so as to improve auditing quality and efficiency.