Internal Audit Reports: The 5 Cs of internal audit

An internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. The internal audit function helps an organization achieve its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Internal auditors are professionals who work within an organization to provide an independent assessment of its operations. They examine and evaluate the organization's policies, procedures, and controls to ensure they are adequate and effective in managing risks and achieving the organization's objectives. Internal auditors provide feedback to management on their findings and recommendations for improving operations, mitigating risks, and enhancing governance.

Some of the key responsibilities of internal auditors include assessing the effectiveness of internal controls, evaluating compliance with laws and regulations, identifying areas of risk, conducting operational and financial audits, and providing recommendations for improving the efficiency and effectiveness of operations.

Internal audit plays a critical role in helping organizations achieve their objectives, ensuring the reliability of financial reporting, and identifying areas for improvement. Internal auditors are essential to ensuring that an organization is operating in compliance with laws and regulations, and they help to identify and manage risks that could impact the organization's performance or reputation.

Internal audit reports are essential documents that provide valuable insights and recommendations to improve an organization's operations, risk management, and governance. The 5 C's framework can help ensure that internal audit reports are comprehensive, clear, concise, consistent, and constructive.

Internal audit reports are often known for adhering to the 5 Cs reporting requirement. A complete, sufficient internal audit often ends with a summary report that communicates answers to the following questions:

Here's a brief explanation of each of the 5 Cs:

1- Criteria: 

• What particular issue was identified, and why was the internal audit necessary?
• Is the internal audit in preparation for a future external audit?
• Who requested the audit, and why did this party request the audit?

2. Condition:

• How is the issue in relation to a company target or expectation?
• Does the company have a policy that was broken, a benchmark that was not met, or another condition that was not satisfied?
• Is the company confident no issue exists, or do they believe an issue is at hand?

3. Cause:

• Why did the issue arise?
• Who was involved, what processes were broken, and how could the issue have been avoided?

4- Consequence:

• What is the outcome of the problems
• Are issues limited to internal matters, or are there risks of external consequences?
• What are the financial implications of the issue?

5-Corrective Action:

• What can the company do to fix the problem?
• What specific steps will management take to resolve the issue, and what type of monitoring or review will occur after solutions have been put in place to ensure a fix has been implemented?

Download PDF 5cs of Internal Audit Report

Also read:- Key things to know about Internal Audit

Applicability and Relevance of Internal Audit in Current Scenario

Last updated: 31/03/2023

Article contributed by:

Risk and Transaction Advisory department

MBG Corporate Services

watch this video to understand our Internal Audit Services