TOPIC 1 : Development of the Profession of Internal Auditing
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in depende ndent nt , Internal auditing is an indepe obje object ctiv ive e assu as sura ranc nce e and consulting activity designed to add value and improve an organ organiza izatio tion's n's operat operation ions. s. It helps an organization accomplish its objectives by bringing a system sys temati atic c, dis discipl ciplin ined ed appr approa oach ch to eva evaluat luate e and and improve the efectiveness of risk mana ma nage geme men nt, control, & governance processes. Internal auditing involves identifying that hinder an an organisation organisation from ! "he ris#s that achieving its goals $! %a#ing sure the organization management #no about these ris#s ! %a#e recommendations for reducing the ris#s
KEYWORDS O RE!E!"ER#
1/1"*%A"IC and )I1CI+8I(* A++;OAC< Adher dhere e to e purp purpos ose, e, auth author orit ity y & respo espons nsib ibil ilit ity y of the the assu assura ranc nce e & consulting activity in a formal internal audit charter) charter) •
A)) A87* e assu assura ranc nce e & cons consul ulti ting ng serv servic ices es provided by e internal auditors allo improvements in e orga organi niza zati tion on=s =s operational activities to achieve its object objective ives s & ensuri ensuring ng e3ecti e3ective ve ris# ris# mgmt system. e internal audit activity adds value to e organis organisatio ation n 2and its sta#ehol sta#eholders ders!! hen it provides objective & relevant ass assura urance, nce, & cont contrribu ibutes to the e3ectiveness & e3eciency of gove goverrnanc nance, e, ris# ris# mgmt mgmt & cont contrrol processes. •
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Independent
Objective Assurance
Consulting Activity
Systematic and disciplined approach
Add value
Risk management
Control
Advisory & related client service :tvts, the the natu naturre and and scop scope e of hic hich h are are agreed e client, are intended to add value and improve improve an organis organisation ation's 's gove govern rnan ance ce,, ris# ris# mana manage geme ment nt and and control processes ithout the internal auditor assuming management respo espons nsib ibil ilit ity y. *:am *:ampl ples es incl includ ude e coun couns sel, el, advic vice, faci facili lita tati tion on and training.
Governance
I()*+*()*(C* and O-*C"II"/ I()* I()*+* +*() ()*( *(C* C* 0 "he "he $reedom from condition conditions s that threaten objectivity or the appearance of objectivity. 1uch threats to objectivity must be mana manage ged d at the the indi indivi vidu dual al audi audito tor, r, engagement, functional and orga organi niza zati tion onal al leve levels ls 2i.e 2i.e.. stat state e of a3airs! O"%E&'('Y 4 An unbiased mental attitude attitude that allos internal auditors to perf perfor orm m enga engage geme ment nts s in such such a mann manner er that that they they have have an hone honest st belief in their or# product and that no signi5cant 6uality compromises compromises are made 2i.e. state of mind!
;I1> %A(A9*%*(" A process to identify, assess, manage & control potential events or situations to prov provid ide e reaso easona nabl ble e assu assura ranc nce e regarding e achievement of e organisation's organisation's objectives. •
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CO(178"I(9 CO(178 "I(9 AC"II"/ AC" II"/
CO(";O8 Any action ta#en by mgmt, e .O.) & other parties to manage ris# and increase e li#elihood that established object objective ives s & goals goals ill ill be achiev achieved. ed. %gmt plans, organises and directs the perfor performan mance ce of su?c su?cien ientt actio actions ns to prov provid ide e reaso easona nabl ble e assu assura ranc nce e that that objectives & goals ill be achieved. •
9O*;(A(C* "he combination of processes processes & structures implemented by e board to inform, direct, manage and monitor e :tvts :tvts of the organ organisa isatio tion n toar toard d the achievement of its objectives. •
"/+*1 O@ I("*;(A8 A7)I" @inancial Audit Operational Audit %anagement Audit Compliance Audit Information Information 1ystemInformation 1ystemInformation "echnology "echnology Audit Audit @raud@orensic Audit *thical business practices audit.
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Reporti ng respon sibility Status
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A 5nancial 5nancial audit audit is an independ independent, ent, objective evaluation of an organiz organizatio ation's n's 5nancial 5nancial reports reports and 5nancial reporting processes. "he primary purpose for 5nancial audits is to give regulators, investors, directors, & managers reasonable assurance that 5nancial statements are accurate & complete.
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A revie revie of ho an organ organiza izatio tion=s n=s mgmnt & its operatin operating g procedu procedures res are are functi functioni oning ng resp respect ect to their their e3ec e3ecti tiv venes eness s and e?c e?cienc ency in meeting stated objectives.
Stakeh older
'ndepe ndent status
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An e:am e:amin inat atio ion n of orga organi nisa sati tion on struc tructu turre, oper peratio tion funct nction ion, anal analys ysin ing g goal goals, s, plan plans, s, poli polici cies es,, activities, ea#nesses and strengths.
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An audi auditt cond conduc ucte ted d to dete deterrmine mine het hethe herr a proc proces ess s or tran transa sact ctio ion n has or has not follo folloed ed applic applicabl able e rules. If rules ules are are vio violate lated d, e audi audito torr determines e cause & recommends ays to prevent future deviations.
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An info inform rmat atio ion n tech techno nolo logy gy audi audit, t, or information information systems audit, is an e:amination of e mgmt controls in an Infor nforma mati tio on tec technol hnolog ogy y 2I"! 2I"! infrastructure.
Respon sibility to2ard s $raud
'+ER+,,.D'OR ;eports to e audit committeeO ) %ost of e time is an organization=s empl em ploy oyee ee 2a 2att tim imes es,, it can be outsourced!. Is an independent contractor, rd party ho is e:ternal to e orgnztn. Is independent of the :tvts audited, but is ready to res espo pond nd to e needs & desi de sirres of al alll elements of mgmnt. Is directly invo in volv lved ed i ith th e prev pr even enti tio on and det detect ection ion of fraud in any form or e:tent in any activity revieed.
E1ER+,,.D'OR ;eports to e sholders
Is an independent contracto contr actor, r, rd party ho is e:ternal to e orgnztn. Is an independent contractor, rd party ho is e:ternal to e orgnztn. Is ind independ ependent ent of mgmnt & e O)s both in fact fa ct & me ment ntal al attitude.
Is in inci cide dent ntal ally ly concer con cerned ned e prev pr even enti tion on & detection of fraud in genera gen eral, l, but is directly concerned hen he n 5na 5nanc ncial ial statements may be materially a3ected. Scope *valuate ;evie e fs to o$ 2ork governance, ensure that e fs contr con trol ol & ri ris# s# ar are e fr free ee fr from om mgmnt material proces ess ses to misstatements assure e & e:press accomplishme opinion nt of entity hether e fs
