5 internal audit

8/3/2019 5 Internal Audit

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INTERNAL AUDITING:

Adding Value Across the

Board


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What is Internal Auditing?Internal auditing is an independent,objective assurance and consulting activity

that adds value to and improves anorganizations operations. It helps anorganization accomplish its objectives bybringing a systematic, disciplined

approach to evaluate and improve theeffectiveness of risk management, control,and governance processes.


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Pre-requisites for effective

internal audit Independence (direct reporting to AC & CEO).

Appropriateness of status

Human Resources and organization structure

Appropriate Mandate through Charter defining its

purpose, authority and responsibility.

Audit Committees Charter and effectiveness. Risk and control based evaluation approach to

add value.


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Pre-requisites for effective

internal audit Use of modern techniques planning,

supervision, review and reporting for

results, and effective follow-up system.

Compliance with IIA standards.

Code of Ethical Conduct.


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Internal Auditors Roles Risk management, control, & governance

processes

Financial analysts

Risk evaluators

Improving operations

Supplying analyses, suggestions, &recommendations

Adding Value


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A Valuable Resource Internal auditing is a

valuable resource to

executive managementand the board of directors

in accomplishing overall

goals and objectives, as

well as strengtheninginternal control and

governance.


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Risk Management Internal auditors identify all auditable activities

and relevant risk factors, and assess their

significance. In this regard, they perform the following

functions: Investigating

Evaluating Identifying potential trouble spots

Communicating

Anticipating emerging issues

Identifying opportunities


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Internal Controls They contribute in the improvement of internal

controls by:

Evaluating efficiency & effectiveness of controls Recommend new controls where needed or

discontinuing unnecessary controls

Use of control frameworks (COSO, CoCo, Cadbury)

Control self-assessment Provide education on risks and controls


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Governance

Internal auditing

provides assurance tomanagement and the

audit committee that

risks are understood

and managedproperly.


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Communications Keeping senior management aware of

critical issues

Ensuring factual communications of

financial and other data

Suggestions based on knowledge of

operations throughout the organization


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Analyzing Operations Internal auditors:

Review operations, policies, and procedures

Help ensure goals and objectives are met

Understanding of big picture and diverse

operations

Make recommendations to improve economyand efficiency


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Reviewing Compliance Ensure managements policies and

procedures are followed

Analyze impact of changes in proceduresAssure compliance with laws & regulations

Review objectives for adherence to

organizations mission, culture, & climate Provide insight to the impact of

noncompliance


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Assuring Safeguards

Evaluate procedures

to safeguard assets

Technologicalsafeguards

Emerging issues


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An Audit Committee Resource

Internal audit is the primary resource of

the audit committee in carrying out its

duties and responsibilities. With thoseresponsibilities increasing and continued

pressure from the SEC for financial

reporting integrity, a functioningpartnership of the audit committee and

internal audit is vital.


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Internal audits relationship to the audit

committee is important to assure there are

no organizational levels below the boardof directors that could prevent necessary

actions or appropriate decisions from

taking place or being made to enhancebusiness opportunities and mitigate risks.


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An active and informed audit committee

provides the ultimate independent and

objective oversight of the corporate controlenvironment, including focus on emerging

trends and risks. Internal auditing is the

primary agent of the audit committeewithin the company.

- Ford Motor Company


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A Broad Perspective

Examining global issues

Assessing quality, economy, & efficiency

Providing accurate and timely

communication

Evaluating emerging technologies

Analyzing opportunities


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Essential Services

Internal auditors review the reliability and

integrity of information, compliance with policies

and regulations, the safeguarding of assets, theeconomical and efficient use of resources, and

established operational goals and objectives.

Internal audits encompass financial activities

and operations including systems, production,engineering, marketing, and human resources.

5 internal audit

Documents