Topic 1 Foundation of IA

8/2/2019 Topic 1 Foundation of IA

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Introduction to InternalAuditing

Week 1



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Discussion Points

What is Internal Auditing?

What does an internal auditor do?

Why consider the profession of internal auditing?

Professionalism



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Definition of Internal Auditing

Internal auditing is an independent,objective assurance and consulting activitydesigned to add value and improve anorganization’s operations.

It helps an organization accomplish itsobjectives by bringing a systematic,disciplined approach to evaluate and

improve the effectiveness of riskmanagement, control, and governanceprocesses.



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Bringing a systematic and disciplined approach to

evaluating and improving the effectiveness of the

organization’s:

• risk management

• control

• governance processes.

Internal Auditing . . .



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Traditional Roles Of An

Internal AuditorEnsuring the Accuracy of Financial

Records

Internal auditing was an extension of the accounting department

Tick and Tie Auditor

Counting Inventories

Verifying Petty Cash

Auditing Payroll Records

Audit by re-doing tasks



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Transitional

Emergence of Operational Auditing More focus on controls within the organization

Assumed a “Management Consultant” role

Checked compliance with companypolicies and procedures Evaluated the effective and efficient use of

resources

Investigated fraud and other special eventssuch as mergers.

Outsourcing and Co-sourcing



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Current RolesServes the Entire Organization

Independent from OperatingManagement

Partners with Management

Participates with ImprovementTeams & Task Force Processes

Uses Technology



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The IIA says as a

Profession for the 21st

CenturyWe know more about modern risk and

control models than any other group.

We understand the organization’s cultureas well as management.

We can recognize, pro-act and react torisk

We are organized globally and addressthe most important strategic issues.



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Cornerstones for

Corporate Governance



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Internal auditors

Function as one of the cornerstones of good governance

Improve an organization’s operations… Provide value-added services…

Help the organization accomplish its

objectives… Come from all disciplines…



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What Is It Like To BeAn Internal Auditor?

Entry-level Responsibilities

Gain An Understanding of OrganizationOperations, Policies, and Procedures

“Learn The Business”

Develop Understanding of Audit Techniques

Enhance Interpersonal Skills

Develop Written and VerbalCommunication Skills

Enhance Computer Skills



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With More Experience

Supervise Staff

Manage Audits Train and Develop New Staff

Develop Teamwork

Solve Problems Build Rapport With Management

Auditor-In-Charge Responsibilities:



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With Even More Experience

Building Rapport With Senior Managementand Audit Committee

Serving in an Advisory Capacity

Training and Advancing Staff Competencies

Developing Audit Plans and Budgets

Participating in Professional Organizations

Being a Valuable Resource for Improving theOrganization

Management Responsibilities



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Why be an internal auditor?

Growing Profession

Good Starting Salary

Great Opportunities

High Visibility



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Erosion of Public Trust in

Corporate Governance

®



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Impact on IA

Time Magazine

“persons of

the year”

2002



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Impact on IA

Re-engaging on Controls

Sarbanes-Oxley … is “all about controls”

Who knows controls betterthan …



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The Profession of Internal

AuditingAllows for high-level understanding of

the organization and industry

Exposure to senior-level management

Transferable skills/disciplines

Networking opportunities

Expanding Profession

Potential travel



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What Can an Internal Auditor

Really Do?With all this information at your finger tips,

the sky’s the limit.

Provide assurance services

Provide consulting services Monitor and Evaluation the Organization’s

Risk Management System

Recommend improvements and

corrections Work with Management

In a phrase: Add value to your organization.



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The Internal Auditor of

TomorrowBusiness Experience and Focus

Expert in Risk Management

Strong technology skills

Strong understanding of thebusiness

Language skills

Certification credentials



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Attributes Of A Successful

Internal AuditorObjectivity

Good Business Knowledge

Good NegotiatorActive Listener

Creative, Inquisitive, Problem

SolverConfident

Intuitive



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Characteristics of a

Successful Internal AuditorExceptional Communication Skills

Reasoning Skills

Technology skillsAnalytical skills

People and Social skills

Language skillsProblem Solving skills



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Focus for Tomorrow’sInternal Auditor

Scope will expand further into governanceand risk

Need to expand in areas of expertise andfacilitation skills

Aggregator for assurance and consultingservices

Assist the organization manage businessrisk



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Promoting The Profession

The IIA through its motto ProgressThrough Sharing has established

an effective network within theprofession



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The IIA Vision

To be the global voice of theinternal auditing profession:

advocating its value, promotingbest practice, and providing exceptional service to its

members.



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Strategic Objectives

Advocacy Globalization Service to Members



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Advocacy

Increased advocacy

… to be recognized as the

global voice for the internal

audit profession



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Advocacy

Fostering relationships with keystakeholder organizations Monitoring and commenting on draftlegislation around

Appearing before various boards andgoverning bodiesResponding to regulators: SEC, PCAOB,INTOSAI, GAO, AICPA, ISO, IFAC, OSC,NACD, FEI, COSO, CICADeveloping position papers



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Advocacy Actions

IIA Position Papers:

IA’s role in ERM

IA’s role in Sarbanes-Oxley IA’s role in expressing an

opinion on internal control



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Globalization

Coordination with all IIA AffiliatesGlobal capacity – developing countriesGlobal committee structureGlobal products & services



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Globalization

Furthering best practices indeveloping nationsGovernance Best practices

Quality auditing

Marketing the profession



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Service to Members

Knowledge resource on best practices Resource for evolving professional

development needsTechnology guidance



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Internal AuditingA Profession for the 21st.

Century?

The world will not value a

Profession that provides what theworld needed yesterday.

It is difficult to imagine a

profession who’s members are notcertified in it’s practice.



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Exercises

1. Define Internal Auditing2. Explain relationship between accounting & auditing

3. Internal Auditing Vs External Auditing?

4. Define what is Financial Audit, ComplianceAudit and Operational Audit.

5. According to Sawyer’s views (refer to textbook- chapter 1) Internal Audit can assist

top management in what way?



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Thank You

Topic 1 Foundation of IA

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