1-2 _ Internal Autng:Defintor Internal Auditing Defined 15 an independent, objective assurance and consulting activity designed toad value and improve an organization's ‘operations. It help an organization accomplish its objectives. by bringing a systematic, disciplined approach to evaluate and Improve the effectiveness of risk management, control and governance processes, Definition Digest: ‘Internal Auditing RINEEEErTeTeTy The services provided within the [i ese eeey Srganization and is Raa distinct” from the [Rae peRi ee ey external audtrole. Baers ‘independent’ eae Internal audlting een works under the principle of objectivity, Actives EAs most carted outin (eee an unbiased manner |e nd free fom the [Ean fnfluences of eee pee Feet ‘assurance and [ES consulting Activity” Js an additional consultancy arm of the company which provides advice and assistance to management on how (0 manage risks contol and governance issues. Internal Audting: Theories, Concept and Application 13 ‘Designed to add value’ ‘Audit activites are clien-based and are responsive to the reeds of the organization, Benefits are aligned to the companys overall goals. “improve an organization's operations ‘The end goal of internal auditing is to bring continuous Improvement to the organization and offer alternative Solutions t6 better the conduct of business thus achieve operational success ‘systematic disciplined approach’ Iehas a clear set of profesional standards and guidance on policies and procedures in order to deliver quality sevice. “Bvaluate and Improve! What is found during the audit should be presented and fevaliated against company policies and standards Evaluation tools and techniques must be applied in professional and impartial manner to ive relibleresuls. “pitectiveness” ‘The principal motive of alt Isto ensure the link between ‘controls and objectives Audit works to achieve effectiveness Inits operation ystems and strategies. ‘Risk management, control and governance processes’ ‘The internal audit activity must evaluate the effectiveness Gnd contribute to the Improvement of risk management Processes1-4 _iteral Auditing: Definition and Overview Internal Auditing: Theories, Concepts and Application 15 _ Four Elements of Internal Audit Activity EVOLUTION OF AUDIT SERVICES eee ie Reliability and Safeguarding of Assets Integrity of Financial and Internal auctor revi Operational ste menns of stetortng Yotormation Internat austors review the reliability ‘and imegrty of Compliance with ows, inant and operating Fegutations and Information andthe.” contract means used to (Wenthyrmessire, Internet auditor review Development of internal Audit Services assy and report the systems established to Snes Sten inermatin, frsure compliance wi “at Effectiveness and ie tet = § 32 £ w WeeInternal Auditing: Denton and Overview INTERNAL AUDIT VERSUS EXTERNAL AUDIT [MANAGING an INTERNAL AUDIT FUNCTION ‘The intemal audit director needs to comply with the a's ‘Arwibute Standards, which say that the chief audit executive (CAE) is responsible Tor properly managing the department so that: (2) audit work fullls the general purposes and Fesponsibllties approved by senior management and accepted by the board, (2) resources ofthe Internal auditing (IA) department freelfclenty and effectively employed, and (2) audit work onforms tothe Standards ‘Mission & Purpose of the IA Department | Review organization's activities to determine whether itis efficiently and eflectively carying out its function of controling in. accordance with ‘management’ instructions, plies, and procedures Internal Auditing. Theories, Concepts and Application 1-7 Determine the adequacy and effectiveness of the system of internal controls inal areas of activity Review the reliality and. integrity. of financal information and the means used to identify, measure, classify, and report such information. Review the means of safeguarding assets and, as appropriate, verify the existence of such assets ‘Appraise the economy and efficiency with which resources are employed, identify opportunities to {improve operating, performance, and. recommend solutions to problems where appropriate Review operations and plans to ascertaln whether Fesult are consent with established objectives and foals, and whether the operations and plans are being carried out as intended. Coordinate audit efforts, where appropriate, with those ofthe external auditors. Review the planning, design, development implementation, and operation of relevant computer hased systems to determine whether (eh adequate controls are incorporated in te systems, ()_ thorough system. testing Is performed at ‘appropriate stoges, (4 system documentacion 1s complete and accurate; and (G) needs of he users are met. Conduct periodic audits of computer centres and make post instalation evaluations of relevant data processing systems to determine whether those ystems meet thelr intended purposes and objectives Particpatein the planning and performance of audits fof acquisitions, Follow up t® ensure the proper fccomplishment ofthe aut Report o those members of management who should be informed, oF who should take corrective action, the rests of audit examinations, the audit opinions formed, and the recommendations made."4 Bvluate the plans oF actions taken to correct Teporees condtans for satstactory disposition of aie ndings. If forrectve action is yerat Anat charter tonsdered Unsatisfactory. hold | ¥ Rasepaliy statment further dscusions wo | " underwnich emer! Bchieve aceptable | sung (a gepartnent disposition Sperates. a Pete adequate | “ Eras neta Feed aust | Geparanents poston in thtreperovectie | Beeman’ feouitiabecee 1 Theyre partes hats fective Independent al ther footer costo «Dabs the | Authority & Responsibility |” oman ta tat es ieee eta Authority | snngshateporo the chef executive oer (C60) butbave aca vo theoard a decors & The IA department will have full free, and fercoeice!| ocncs “to | ar Fe aan ae Tia Deal posi | eee foane- ie | ena Feoryatctofanaedt | rtttrCeO an Tera sudo hve | puting aly teier suthonly over | east conmlace ‘nor responsibility for the abe hoanlet trecuars, Describes the prose, fcivites they aut pecan Ault director should | Tesponsbily ofthe A have direct access to the | Seeeonei aude committee since te |_SPSeNL_ tends to enhance Las independence and objectivity. Responsibility ‘The IA department accomplishes its purpose of assisting management by reviewing, examining, and evaluating Intenal Auditing: Theories, Concepts and Application 19 activities, furnishing analyses and. appraisals, and Feporting findings and recommendations. This audit responsibilty cannot relieve any operating manager of the requirement for ensuring proper control within his lorherarea of concern ‘The IA department also has the responsibilty to perform audit work with due professional care_and_ with appropriate education, experience, certification, profesional image and atitude, and personal integrity.1-40 __tnteral Auditing: Definition |LExplain internal auditing n the context of, a. Independence '. Assurance and Consulting activity & Sistema disciind apprach Evaliateand improve Risk management. contr and governance processes Enumerate Four elements of internal audit activity 1 Hallaare of Professionalism ML tdentineation. 1. ‘Responsible for properly managing the internal audit department 2 An independent, objective assurance and consulting ‘activity designed toad value and improve an organization's ‘perations 2) As a professional discipline, internal audit works and is tuided by aset of standards to ensure credibly, reliabilty fnd quay of internal audit practitioners and thelr work {{ Are fundamental principles and procedures that make Internal auditing a unique, disciplined and systematic activity 1V.Multiple choice. 1. Internal auditing works under the principle of objectivity ‘tivities mist be carried out in an unbiased manner and {ree from the influences of management. Independence 1, Assurance and consulting activity Designed to add va 4. Systemati, disipined approach Internal Auting: Theories, Concepts and Application 1-81 2. An additional consultancy arm of the company. It provides advice and assistance to management on how to ‘manage risks wel, Independence ‘Assurance and consulting activity © Designed to add value 4. Systematic, disclplined approach 3, thas a clear set of professional standards and guidance (policies and procedures) in order to deliver quality service. dependence surance and consulting activity Designed to add value ‘Systematic, disciplined approach ‘The internal audit activity must evaluate the Cifectiveness and contribute to the Improvement of risk management processes. Independence Bb. Riskmanagement, contol and governance processes Assurance and consulting activity 44 Designed to add value 5. ‘The end goa of interna auditing i to bring continuous improvement to the organization and offer alternative Sotions to better the conduct of business thus achieve ‘operational success, 2 Independence 1. Risk management, control and governance processes Assurance and consulting activity 4. Improve an organization's operations