Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Accounts payable turnover ratio Adequate control

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Assurance services Benchmarking

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Chief audit executive (CAE) Compliance

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Consulting services Contract

©2013 ©2013
 Definition
A level of control that is present if management
has planned and organized in a manner that
provides reasonable assurance that the
organization's risks have been managed
effectively and that the organization's goals and
objectives will be achieved efficiently and
economically.
The IIA’s CIA Learning System®
Definition
The comparison of an organization or project to
similar internal or external organizations or
projects, for the purpose of determining areas for
potential improvement and to identify best
practices. May also be used to assess likelihood
and impact of potential events across an industry.
The IIA’s CIA Learning System®
Definition
The conformity and adherence to policies, plans,
procedures, laws, regulations, contracts, or other
requirements.
The IIA’s CIA Learning System®
Definition
An agreement between parties, with terms and
conditions that describe the agreement and
constitute a legal obligation.
The IIA’s CIA Learning System®
Definition
A financial ratio that includes all outstanding
obligations a company owes its creditors.
The IIA’s CIA Learning System®
Definition
Objective examination of evidence for the
purpose of providing an independent assessment
on risk management, control, or governance
processes for an organization.
The IIA’s CIA Learning System®
Definition
The top position in an organization responsible
for internal audit activities.
The IIA’s CIA Learning System®
Definition
Advisory and related client service activities, the
nature and scope of which are agreed with the
client and which are intended to add value and
improve an organization's governance, risk
management, and control processes without the
internal auditor assuming management
responsibility.
The IIA’s CIA Learning System®
 Part 2: Internal Audit Practice Part 2: Internal Audit Practice
Section I Section I

Control Control self-assessment

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Cost reimbursement contract Current ratio

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Debt ratio Debt to equity ratio

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Due care Due diligence

©2013 ©2013
 Definition
A variety of assessment techniques, including
facilitated workshops and surveys, in which the
assessment is performed by people involved in
the area or process being assessed rather than by
an independent party.
The IIA’s CIA Learning System®
Definition
A measure of an organization's potential for
paying down current liabilities; a larger number
indicates more assets in relation to debt and
therefore greater ability to pay holders of short-
term debt.
The IIA’s CIA Learning System®
Definition
A ratio that measures an organization's ability to
cover long-term liabilities from owners' equity.
The IIA’s CIA Learning System®
Definition
The process of investigating a person, business,
or financial transaction to establish the value of
an entity or transaction and the cost of any
associated liabilities.
The IIA’s CIA Learning System®
Definition
Any action taken by management, the board, and
other parties to manage risk and increase the
likelihood that established objectives and goals
will be achieved.
The IIA’s CIA Learning System®
Definition
A type of contract that allows for payment of all
incurred costs within a predetermined ceiling
that can be allocated to the contract, are
allowable within cost standards, and are
reasonable.
The IIA’s CIA Learning System®
Definition
The ratio of all an organization's debts to all of
its assets; provides a general measure of ability
to repay creditors.
The IIA’s CIA Learning System®
Definition
The level of caution that an individual exercises
when performing a due diligence audit and
reporting the results.
The IIA’s CIA Learning System®
Part 2: Internal Audit Practice Part 2: Internal Audit Practice
Section I Section I

Financial leverage Fixed asset turnover ratio

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Fixed price contract Flowchart

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Gross profit margin Liquidity

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Operating leverage Quick ratio

©2013 ©2013
 Definition
A measure of how efficiently a company uses its
fixed assets to generate sales; the higher the
ratio, the better.
The IIA’s CIA Learning System®
Definition
A graphical representation of the actual or ideal
path followed by any service or product;
provides a visual sequence of the steps in a
process, illustrates the relationship between
parts, and identifies what the process does or
should do.
The IIA’s CIA Learning System®
Definition
An organization's ability to pay its current and
future obligations efficiently and on time without
undue hardship. They measure an organization’s
solvency by comparing assets to liabilities.
The IIA’s CIA Learning System®
Definition
A ratio that is similar to the current ratio but
eliminates inventory, which is considered the
least liquid portion of current assets and
therefore the least available for reducing current
debts.
The IIA’s CIA Learning System®
Definition
The use of fixed interest in the form of debt or
preferred equity stock with the expectation of
earning a greater return than the cost of the fixed
interest.
The IIA’s CIA Learning System®
Definition
A type of contract that requires a contractor to
successfully perform the contract and deliver
supplies or services for a price agreed to up
front.
The IIA’s CIA Learning System®
Definition
The ratio of gross profit (or net sales minus cost
of goods sold) to sales.
The IIA’s CIA Learning System®
Definition
The proportion of fixed costs used in the
production of goods or services.
The IIA’s CIA Learning System®
Part 2: Internal Audit Practice Part 2: Internal Audit Practice
Section I Section I

Residual risk Risk appetite

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Risk assessment Risk identification

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Risk measurement Risk prioritization

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Risk response Strategic plan

©2013 ©2013
 Definition
The amount of risk an organization is willing to
accept in pursuit of value.
The IIA’s CIA Learning System®
Definition
The method of recognizing possible threats and
opportunities.
The IIA’s CIA Learning System®
Definition
Ranking risks, formally or informally, from the
highest to the lowest, establishing the relative
strength of each risk and the potential
consequences of each.
The IIA’s CIA Learning System®
Definition
A document that indicates how an organization
will carry out its mission, vision, goals, and
objectives, given factors in the internal and
external environments.
The IIA’s CIA Learning System®
Definition
The risk remaining after management takes
action to reduce the impact and likelihood of an
adverse event, including control activities in
responding to a risk.
The IIA’s CIA Learning System®
Definition
The identification of risk, the measurement of
risk, and the process of prioritizing risk
(considering likelihood and impact) or selecting
alternatives based on risk.
The IIA’s CIA Learning System®
Definition
The evaluation of the magnitude of risk, based
on the likelihood and impact of risk occurrence.
The IIA’s CIA Learning System®
Definition
The actions taken to manage risk.
The IIA’s CIA Learning System®
Part 2: Internal Audit Practice Part 2: Internal Audit Practice
Section I Section I

Strategic planning Times interest earned

©2013 ©2013

Part 2: Internal Audit Practice Part 2: Internal Audit Practice

Section I Section I

Total asset turnover Value proposition

©2013 ©2013
 Definition
A measure of an organization's ability to service
all of its liabilities; the number of times a
company can cover fixed obligations with
earnings before interest and taxes (EBIT).
The IIA’s CIA Learning System®
Definition
A positioning statement that describes added
value to a customer; providing assurance,
insight, and objectivity.
The IIA’s CIA Learning System®
Definition
The process organizations use to determine
where they want to be and how they will get
there.
The IIA’s CIA Learning System®
Definition
A measure of how well assets are being used to
produce revenue. Calculated as the proportion of
net sales to average total assets. The higher the
number, the more efficiently all assets are being
used.
The IIA’s CIA Learning System®