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INTRODUCTION TO INTERNAL AUDITING

SESSION 1
Learning Objectives

LO 1 : DISCUSS INTERNAL AUDIT


STANDARD, GUIDELINES,
AND CURRENT ISSUES AND IT
USAGE IN THE PROCESS OF
INTERNAL AUDIT
Introduction
The IIA Standards
The essential guide to internal auditing
The development of internal auditing
IT usage in the process of internal audit
INTRODUCTION
Internal auditor's rule
Internal auditor as assurance provider
Internal auditor as as a consultant
Authorities and responsibilities of internal auditors
Trend and relevance of internal auditor
Internal auditing function and corporate governance
INTERNAL AUDITORS AS
ASSURANCE PROVIDERS
Assurance reports on these measures are currently voluntary, except for
the audit report on economic measures (four basis financial statements),
but internal auditors are well-trained and positioned to provide
numerous assurance services.

Internal auditors, in addition to these voluntary assurance services, can


assist external auditors in their integrated audit of internal controls and
financial statements. (PCAOB Auditing Standard (AS) No. 2,
superseded by AS No. 5)

Internal auditors may assist management in complying with Section 302


and 404 requirements of SOX by reviewing managements certifications
on internal controls and financial statements or providing some type of
assurance on the accuracy of those certifications.
INTERNAL AUDITORS AS
CONSULTANTS
Internal auditors can provide a variety of consulting
services to the companys board of directors, the audit
committee, management, and other personnel at all
levels.

1)Consulting services to the board of directors and


audit committee.
2)Consulting services to management.
3)Internal auditor training services.
AUTHORITIES AND
RESPONSIBILITIES OF
INTERNAL AUDITORS
The internal audit function should have:
(1) full and free access to the companys audit
committee;
(2) unrestricted access to the companys records,
documents, property, and personnel; and
(3) authority to discuss initiatives, policies, and
procedures regarding risk assessment,
internal controls, compliance, financial
reporting, and governance processes with
management and other corporate
governance participants.
TREND AND RELEVANCE OF
INTERNAL AUDITORS

1.The Foreign Corrupt Practices Act (FCPA)


1977
2.COSO Report of the National Commission on
Fraudulent Financial Reporting (1987)
3.The IIA redefined internal auditing in 1999
4.SOX Sections 302 and 404 (keep in mind that
SOX does not directly address internal auditor
responsibilities or internal audit function.)
5.The PCAOB in its AS No. 2
INTERNAL AUDITING
FUNCTION AND CORPORATE
GOVERNANCE
Comparison of Internal Audit (Pre- and
Post corporate Governance Reforms)
THE IIA STANDARDS
IIAs Attribute Standard
THE IIA STANDARDS
IIAs Performance Standards
THE IIA STANDARDS
Code of Ethics
The IIA Standards
THE IIA STANDARDS
THE ESSENTIAL GUIDE TO
INTERNAL AUDITING
Internal Auditors are striving to fulfill their responsibilities by using the best practices. internal
auditors best practices should include the following:
Build an adequate internal audit staff to support the needs of business
Structure the internal audit function on a fluid and flexible framework
Design an enterprise wide risk-based audit program.
Broaden audit scope to address third-party and vendor risk.
Combat fraud by advocating ethical conduct throughout the organization.
Manage information systems risk proactively
THE DEVELOPMENT OF INTERNAL
AUDITING
The establishment, growth, and evolution of the
contemporary internal auditing profession is closely
intertwined with the history of The Institute of Internal
Auditors (IIA), an organization founded in the United States
in 1941. In the recently released edition of 60 Years of
Progress Through Sharing, chronicling the history of The
IIA

The IIAs 60-year history is illustrious and each of the


highlights featured in this 10- year narration
[supplementing the 50-year history of The IIA] have
contributed to the organization that The IIA is today:
THE DEVELOPMENT OF INTERNAL
AUDITING
The demand for both external and internal auditing is sourced in the need
to have some means of independent verification to reduce record-keeping
errors, asset misappropriation, and fraud within business and non business
organizations

The origin of auditing goes back to times scarcely less remote than that of
accountingWhenever the advance of civilization brought about the
necessity of one man being intrusted to some extent with the property of
another, the advisability of some kind of check upon the fidelity of the
former would become apparent.
IT USAGE IN THE PROCESS OF
INTERNAL AUDIT
Technology development makes IT become one of the
important support for internal audit

IT rules in internal audit is in Information Processing


Controls, such as:
- General Controls
- Computer Application Controls
- Controls over the Financial Reporting Process
References
K. H. Spencer Pickett. 2011. The essential guide to internal
auditing. Wiley. West Sussex. ISBN:9780470746936

Razzetti, Eugene A.. 2011. The executive guide to internal


auditing. Author House. Bloomington. ISBN:9781496914392

Swanson, Dan. 2010. Swanson on internal auditing: raising the


bar. IT Governance. Cambridge. ISBN:9781849280679