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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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An Audit Committee Resource
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 Audit Committee Resource
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.