Problems of the internal auditor’s independence and replacement of internal auditing by the internal control system

Internal auditing appeared in Lithuania not long ago. There are many problems, which are caused by insufficient practice of deep and long-term internal auditing in Lithuania as compared with auditing traditions practiced in Western countries. The object of this research is internal auditing. The aim of this article is to make comparative analysis of internal auditing and internal control, define the influence of internal auditing on the internal control system and consider the notion of an internal auditor’s independence. The research is based on the analysis of normative documents regulating internal auditing and various literature sources on economics, summarizing and comparing the methods by logical analysis. The difference between internal auditing and internal control are presented in the article. The scheme, which shows the role of internal auditing and its link with the system of internal control is also presented in the article. Summarizing the presented theoretical material it may be concluded that internal auditing is a component of the internal control system and it can not be replaced by the internal control system. If internal auditing is not included in to the system of internal control, this system becomes an open management system, i.e. the system without return; the internal auditor serves as a return link in this system. He/she informs the management about the situation in internal control. The auditor’s independence from his clients, the management and the owners is stressed in the case of external auditing. The internal auditor should be independent from the institution activities, however, he depends on the management of the institution