Who Audits The Auditors Presentation

Who Audits the Auditors?
The value of Internal and External Quality Assessments

Speaker:
www.theiia.org/Quality
Speaker Background Information
Topics we will cover Today
Key Areas of Discussion Today
Quality Improvement & Assurance Program External quality assessments and why your
audit group should have one
What to expect from an external QA How to get the most value from a QA
How an Audit professional should prepare for a QA
Some areas we will NOT talk about today
All of the Standards with which you need to comply

to pass a QA
All of the components of an effective quality

program There just isnt enough time to do this and the IIA and other organizations have seminars, books and CDs covering these topics
A Show of Hands
How many Internal Audit Activities have a QA&IP in place today?
A Show of Hands
How many work for an organization that has had an external QA?
A Show of Hands
How many work for an organization that has not had an external QA?
Is anyone planning to have one?
A Show of Hands
How many have been part of an external QA team?
Does this look familiar?
http://www.theiia.org/guidance/standards-and-practices/professional-practices-framework/
Have you read the Quality Standards?

Standard 1300 Quality Assurance and Improvement
Standard 1310 Quality Program Assessments Standard 1311 Internal Assessments Standard 1312 External Assessments
Standard 1300: Quality Assurance and Improvement Program (QA&IP)

The chief audit executive must develop and maintain a quality assurance and improvement program that covers all aspects of the internal audit activity and continuously monitors its effectiveness. The program must be designed to help the internal auditing activity add value and improve the organizations operations and to provide assurance that the internal audit activity is in conformity with the Standards and the Code of Ethics.
Quality Assurance and Improvement Program

Why is a Quality Assurance & Improvement Program necessary? As an Organization and its Internal Audit shops grow, its operations undergo refinement, and its internal processes change and evolve, its quality monitoring process must keep pace.
Quality and Improvement Program

What would be the elements of a Quality and Improvement Program?
QA
1311: Internal Assessments

Must include: Ongoing reviews of the performance of the internal audit activity; and Periodic reviews performed through selfassessment or by other persons within the organization, with knowledge of internal auditing practices and the Standards. Person(s) conducting assessment can be part of internal audit activity or from another area in the company.
Some Elements of a QA&IP

Staff Information (education, skills, certifications)
Audit Plan Budget to Actual

Audit Cycle Time Issues and Recommendations Tracking
Customer Satisfaction Survey

Staff Meeting Benchmarking to Best Practices
Training
Work Paper Review (ongoing) QA Review Action Plan
Balanced Scorecard for Internal Auditing

Expectations Perspective on IA Roles Satisfaction Surveys Requests Complaints
Board/Audit Committee
OBJECTIVES
List here.
MEASURES
List here.
Perspective on IA Roles Satisfaction Surveys Risk Concerns CAE/AC Private Meetings
Management/Audit Customers
OBJECTIVES
List here.
MEASURES
List here.
CORPORATE STRATEGY
Internal Audit Processes

OBJECTIVES
List here.
MEASURES
List here.
Experience
Education Training Certification Reporting Relationships
INTERNAL AUDIT STRATEGY
Importance Levels
Improvements
Innovation/Capabilities
OBJECTIVES
List here.
Findings Repeat Findings Savings Quality Assessment www.theiia.org/Quality
MEASURES
List here
What is the Value of Quality to Internal Audit

ABC Organization Executive Level
Internal Audit
At this level Internal Audit is not considered a valued resource to the Organization

ABC Organization Executive Level
Internal Audit
As the Quality of Internal Audit increases the acceptance at the Executive Level gets Internal Audit closer

ABC Organization Executive Level Internal Audit
Once Quality is achieved Internal Audit is embraced by the Executive Level as a valuable resource within the Organization
Whos Responsible for the Quality of Internal Audit?

Organization Chief Audit Executive (CAE)
Who Will Benefit?

Internal Audit Profession IA Stakeholders (AC, BOD, Regulatory Body, Sr. Mgmt) Internal Auditor specially CIAs
Professionalism & Commitment

The Drive to be the Best
Success (individual & organization) Persistence with a Purpose Professional Development The Pride to be an Internal Auditor
By the way, whats an external quality assessment (QA)?

Professional standards require each internal audit function to obtain an external quality assessment at least once every five years (Standard 1312)
Whats the focus of an external QA?
IIA Code of Ethics International Standards for the Professional

Practice of Internal Auditing
Audit committee & internal audit charters Professional certification and education Process improvement & best practices
What happens in an external QA?
Interview & survey stakeholders Assess compliance with the IIA Code of Ethics
and the Standards
Assess charters, policies & procedures Review staff experience & qualifications Inspect workpapers
What are the benefits of an external QA?
Expert advice & counsel from practitioners with

decades of experience and broad exposure to the best IA functions
Sounding Board Leverage for funding, authority, independence &

training
Visibility Pipeline to the audit committee & senior

management
Making a difference
HBS or equivalent executive training

program for CAE
Staffing increases Training and certification support Implementation of CAATs
Why have an external QA?
Professional credibility Organizational credibility Legal liability Compliance with Standards Continuous improvement Audit Committee oversight
Why are some IA functions not in compliance?

(The IIA Common Body of Knowledge survey reports
39% of IA functions have never had an external QA)
28% of IA functions are less than 5 years old Internal audit is not regulated Unaware of the requirement Unfazed by the penalty Costs in money and time
What problems are commonly found?
Inadequate Quality Assurance &

Improvement Program
Consulting omitted from the mission and

charter
Inadequate IT coverage or technical skills Lack of performance measures

What problems are commonly found?
Inappropriate CAE reporting

relationships
Out-of-date charters Client perception of inadequate audit

staff knowledge
No formalized risk assessment process

What Does It *Cost?

Number of Internal Audit Staff Average Size of External QA Team Average IA Staff Preparation (Hours) Avg IA Staff Support of QA Team (Hrs) Average Time to Complete QA (Days) Average Cost
1 to 2 3 to 6 7 to 15 16 to 20 21 to 30 31 to 50 51 to 70 71 to 100
2 3 4 3 6 5 6 3
200 110 100 90 135 N/A 80 200
33.5 40 60 70 60 N/A 50 120
6.6 4.2 5 9.2 9 10.5 13 20
$13,000 $15,000 $22,000 $35,000 $42,000 N/A $75,000 $80,000
*Source: IIARF Survey April 2007
How long does an external QA take?

A sample timeline
RFP 8/1 8/15 Prepare background info 9/1- 9/15 Stakeholder surveys 9/15 9/30 GAIN data input on IIA website 9/15 Preliminary meeting 10/15 On-site fieldwork 10/30 11/3 Issue draft report 11/15 Receive reply to draft report 11/22 Issue final report 11/29
What is a self-assessment with independent validation (SAIV)?

Perform your own internal assessment and then
Engage an independent party to review your work
Whats the advantage of the SAIV?
It costs less!
Whats the trade-off for a SAIV?

Requires IAA to budget more resources
Diminished:
Independence Outside perspective Expertise Board leverage
Senior management leverage

Oomph
What should you do?

If you cant get the budget for an external QA, go the SAIV route to get into compliance
Consider SAIV for your 1st QA and follow-up with an external QA in 2-3 years
What about peer reviews?

Even if he is lucky, the best barber can count on no more than the 2nd best haircut
Issues: quality, independence, experience, industry knowledge, confidentiality, etc.
How long does an SAIV take?

A sample timeline RFP 8/1 8/31 Prepare self-assessment 9/1- 9/30 Stakeholder surveys 9/15 9/30 GAIN data input on IIA website 9/15 Preliminary meeting 10/15 On-site validation 10/30 11/1 Issue draft report 11/15 Receive reply to draft report 11/22 Issue final report 11/29
IIA Recognition Plaque

Organizations that have an external quality assessment completed by The IIA with a General Conformance opinion will receive a recognition plaque
Where to Find Quality Resources?

Free Web-Based Resources by IIA Inc. and IIA Affiliates (www.theiia.org /Quality)
QA training seminars by IIA Inc. and IIA Affiliates Local Chapters and Study Groups Quality Services by IIA Inc., Affiliates, and Other Service Providers
Time for.
Questions???
This presentation is from
The Institute of Internal Auditors

Global Headquarters www.theiia.org Contact us at Quality@theiia.org

Who Audits The Auditors Presentation

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Who Audits the Auditors?

The value of Internal and External Quality Assessments

Speaker Background Information

Topics we will cover Today

Key Areas of Discussion Today

Some areas we will NOT talk about today

All of the Standards with which you need to comply

All of the components of an effective quality

How many Internal Audit Activities have a QA&IP in place today?

How many have been part of an external QA team?

Does this look familiar?

Have you read the Quality Standards?

Standard 1300: Quality Assurance and Improvement Program (QA&IP)

Quality Assurance and Improvement Program

Quality and Improvement Program

1311: Internal Assessments

Some Elements of a QA&IP

Audit Plan Budget to Actual

Customer Satisfaction Survey

Balanced Scorecard for Internal Auditing

Perspective on IA Roles Satisfaction Surveys Risk Concerns CAE/AC Private Meetings

Internal Audit Processes

INTERNAL AUDIT STRATEGY

Findings Repeat Findings Savings Quality Assessment www.theiia.org/Quality

What is the Value of Quality to Internal Audit

What is the Value of Quality to Internal Audit

What is the Value of Quality to Internal Audit

Whos Responsible for the Quality of Internal Audit?

Who Will Benefit?

Professionalism & Commitment

By the way, whats an external quality assessment (QA)?

Whats the focus of an external QA?

IIA Code of Ethics International Standards for the Professional

What happens in an external QA?

What are the benefits of an external QA?

Expert advice & counsel from practitioners with

Sounding Board Leverage for funding, authority, independence &

Visibility Pipeline to the audit committee & senior

HBS or equivalent executive training

Staffing increases Training and certification support Implementation of CAATs

Why have an external QA?

Why are some IA functions not in compliance?

39% of IA functions have never had an external QA)

What problems are commonly found?

Inadequate Quality Assurance &

Consulting omitted from the mission and

Inadequate IT coverage or technical skills Lack of performance measures

What problems are commonly found?

Inappropriate CAE reporting

Out-of-date charters Client perception of inadequate audit

No formalized risk assessment process

What Does It *Cost?

200 110 100 90 135 N/A 80 200

33.5 40 60 70 60 N/A 50 120

6.6 4.2 5 9.2 9 10.5 13 20

$13,000 $15,000 $22,000 $35,000 $42,000 N/A $75,000 $80,000

*Source: IIARF Survey April 2007

How long does an external QA take?

What is a self-assessment with independent validation (SAIV)?

Whats the advantage of the SAIV?

Whats the trade-off for a SAIV?

Senior management leverage