GETTING TO KNOW
INTERNAL AUDITING
THE PROFESSION THAT MAKES A DIFFERENCE
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Organization
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WHATS INTERNAL AUDITING?
Internal auditing is an independent, objective
assurance and consulting activity designed to add
value and improve an organization's operations. It
helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk
management, control, and governance
processes.
HIGH LEVEL COMPARISON
Internal Audit
Broad focus
Accurate financials
Efficiency/effectiveness
Accomplishing objectives
Compliance w/laws, policy
Safeguarding assets
And more!
FINANCIAL STATEMENT AUDIT
Specific focus
Accurate financial statements
Going concern
Reviewing historical data
Compliance with accounting
and other regulations
Diverse skills sets are required
Primarily accounting skills
Integral part of the
organization
Independent from the
organization
INTERNAL AUDITORS ASSESS RISKS
To help keep bad things from happening
To help assure good things can happen
To help management understand
Where their risks are
Whether the risks are under control
Whether the risks are worth taking
FINDING RISKS IS NOT ENOUGH
Internal auditors evaluate the controls
that help organizations manage risks
Are controls in place?
Do the controls work?
Are additional controls needed?
Are there unnecessary controls?
Are the controls cost-effective?
FIVE CRITICAL TASKS
Determine whether controls are adequate
Suggest improvements to increase efficiency
and effectiveness or to lower operating costs
Determine whether policies and procedures are
followed
Determine whether laws and regulations are
being obeyed
Detect fraud or manipulation of records
EFFECTIVE GOVERNANCE
Board of Directors
Internal Audit
External Audit
Management
MAINTAINING INDEPENDENCE:
DUAL REPORTING RELATIONSHIPS
About 80 percent of Chief Audit
Executives (CAEs) report functionally to
the Audit Committee/Board of Directors
Independent from audited activities
Wide authority
Most common administrative reporting
relationship is to the President/CEO
MEETING DIVERSE STAKEHOLDER NEEDS
INTERNAL AUDITORS
Find out whats working and whats not
Keep an eye on the corporate climate
Look at the organization with fresh eyes
Look beyond the financial statements
Advocate improvements
Raise red flags
Tell it like it is
AUDITORS TELL IT LIKE IT IS
Keep senior management aware of critical
issues
Ensure factual communications of financial,
operational and compliance data
Make suggestions based on knowledge of
operations throughout the organization
WHAT WOULD YOU SAY
If someone asked you
whether or not their
organization needed
internal auditors?
WHEN DOES A COMPANY NEED AN
INTERNAL AUDIT FUNCTION?
Internal audit is not legally required in the U.S.
Exceptions: NYSE-listed corporations and a few specific
industry/government requirements
Required in some countries
Every organization, regardless of its size, should
have some type of internal control system/process
The IIA believes that an organization is best served by
a fully resourced and professionally competent
internal auditing function
WHAT WILL AN INTERNAL AUDIT
FUNCTION ACCOMPLISH?
Will it reduce liability or help control risks?
Will it free management to focus on core
mission?
Will it improve the accuracy of financial and
operational information?
Do we need a second opinion?
Can we improve service delivery?
Will it improve financial results?
INTERNATIONAL PROFESSIONAL
PRACTICES FRAMEWORK
Mandatory Guidance
International Standards for the Professional Practice
of Internal Auditing
Definition of Internal Auditing
Code of Ethics
Strongly Recommended
Position Papers
Practice Advisories
Practice Guides
[Link] or [Link]
QUESTIONS?