EVALUATION ON THE EFFECTIVENESS OF INTERNAL AUDIT IN A NON-PROFIT ORGANIZATION (A CASE STUDY IN A NON-GOVERNMENTAL ORGANIZATION: AIESEC INDONESIA)

Abstract

Managing a non-profit organization with lots of projects and high amount of funds can be complicated, because it is similar with managing a company that has high amount of sales and income. Therefore, non-profit organizations also require proper accounting system and adequate control. One method to assess and improve an organization’s accounting system and internal control is to do an internal audit. Hence, internal audit is important to be established in non-profit organizations. However, the human resources in non-profit organizations sometimes are not as professional as in the companies, especially in youth organizations. Since youth organizations are run by youth, most of them still lack of knowledge. Therefore, this research is created to help AIESEC Indonesia, a non-profit youth organization, to improve the effectiveness and quality of its internal audit. The scope of this research is starting from how the internal audit department is perceived within the organization, how the department is positioned in organization structure, and how the audit process is conducted. The research method used in this research is qualitative method. The data is gathered by using types of audit procedures which are inquiry, observation, and inspection of documents. The data is then evaluated by matching it with standard and literatures. During the evaluation, researcher found several weaknesses in internal audit process in AIESEC Indonesia. The major weaknesses include: no internal audit charter and audit program, audit objectives and scope are not reviewed, Chief of Internal Audit involves in fieldwork, content of working paper is not integrated with audit checklist, preliminary findings were not discussed, and monitoring system is not maintained. Based on standard and literatures, all of these weaknesses can influence the effectiveness and quality of an internal audit, and therefore need to be improved. From the weaknesses that have been found, researcher formulates several recommendations for internal audit department of AIESEC Indonesia to help them improve the effectiveness of internal audit there. The recommendations are taken from requirements written in the standard and recommendations suggested by literatures.