INTERNAL

AUDITING
Risya Defi 20160420007
Wisnu Wardhana 20160420010
Anggita Tri Wulandari 20160420018
Rizzah Rahmaniah 20160420023
FOUNDATION OF INTERNAL AUDIT
 Internal Audit has been known for a long time. And now auditors can be
grouped into two parts.

 Internal Auditing is an auditor who comes from within the company, which has
the independent right to review and assess all matters relating to accounting
procedures, operational areas, and the quality of the factory process.

 An external auditor is the granting of authority to an audit that comes from

outside the company to examine ensuring that the financial statements of the
company are in accordance with the standards that are generally accepted.
People or individuals who want to audit a company must have a CPA (Certified
Public Accountants) license.
INTERNAL
AUDITING HISTORY
AND BACKGROUND

1930 : THE
1942: IIA INTERNAL AUDIT
(INSTITUTE of HAD NOT BEEN
INTERNAL RECOGNIZED AS
AUDITOR) WAS AN IMPORTANT
ESTABLISHED PROCESS BY
MANY COMPANIES

1934: FORMING
SECURITIES AND
EXTERNAL
COMMISSIONS
COMMISSION (SEC)
 ORGANIZATION OF THIS BOOK

 The overall aim of this book is to determine the modern internal audit
practices that exist today and to describe the CBOK (Common Body of
Knowledge) in the profession. Therefore, in this book discusses 8 parts:
AUDIT BASIC CONCEPT

Planning, Organizing, Briefing

Resource

Information Company Objectives

Technology
Supervision and Control
1. Reliable data Accounting
2. Maintaining security
company Assets
3. Opertaion efficiently
4. Obeying the provisions,
regulation and policies
Activity Audit company
 RELATIONSHIP AND FUNCTIONS
RECOMMENDED IN THE AUDIT

1𝑠𝑡 party

Validation Audit

3𝑟𝑑 parties Responsibility

2𝑛𝑑 parties
DEFINITIONS AND TYPES OF AUDIT
MANAGEMENT
Audit management is responsible for ensuring that

board-approved audit directives are implemented.

Management audit type:

- audit of financial statements
- compliance audit
- internal audit
- operational audit
 AUDIT TYPE, IMPLEMENTATION, OBJECTIVE
AND RECEIVER OF THE REPORT
IMPLEMENTATION
AUDIT TYPE OBJECTIVES AUDIT RECEIVER
AUDIT
Determine whether the auditee report Third parties
Audit of
has been prepared in accordance with (investors and
financial External Auditor
generally accepted accounting creditors)
statements
principles

Management of
Determine the level of compliance of
Compliance Internal auditor or the entity
an entity with laws, policies, plans
Audit external auditor concerned,
and procedures
government

 Assess the reliability of financial

statements
 Determine the level of compliance of
an entity Management of
Internal Audit Internal Auditor  Assess organizational internal the entity in
control concerned
 Assess the efficiency and
effectiveness of resource use
Program
Management of
Operational the entity in
External Auditor Assess the efficiency and
Audit concerned
and Internal effectiveness of resource use
(management)
 SCOPE, OBJECTIVES AND OBJECTIVES OF
AUDIT MANAGEMENT
o Scope: all aspects of management activities (whether all or part of the

program / activity carried out

o Target: Activities, activities, programs and fields within the company that

need improvement or improvement, both in terms of economization,

efficiency, effectiveness

o Audit Objective Elements:

- Criteria: (activity standard)

- Cause: (individual actions / activities )

- Effects: comparison between causes and criteria

 MANAGEMENT AUDIT FRAMEWORK

Criteria

Condition Cause
GAP
𝒂𝒄𝒕𝒖𝒂𝒍 𝒓𝒆𝒔𝒖𝒍𝒕 𝒐𝒇 𝑰𝒎𝒑𝒍𝒆𝒎𝒆𝒏𝒕𝒂𝒕𝒊𝒐𝒏
𝒑𝒓𝒐𝒈𝒓𝒂𝒎 𝒑𝒓𝒐𝒈𝒓𝒂𝒎
Effect
Financial

Non Financial

Recommendation

Follow -up
BASIC PRINCIPLES OF AUDITING
 The audit is focused on audit objects that have the opportunity to be
improved
 Precondition for assessment of audit object activities
 Disclosure of positive findings
 Identification of individuals responsible for the deficiencies
 Determination of actions against officers who should be responsible
 Legal law
 Investigation and fraud prevention
 DIFFERENCES OF FINANCIAL AUDIT
AND MANAGEMENT AUDIT

Management Audit Financial Audit

1. Audit Objectives Improvement of company Get an opinion
management programs /
activities that still need
improvement
2. Audit Scope the overall function of company accounting data and
management and related units in the process of presenting
it financial statements
3. Juridical basis Optional required

4. Audit Executor Internal and external audit Audit independen (Audit

eksternal).
5. Audit Frequency Optional Routine
DIFFERENCES OF FINANCIAL AUDIT
AND MANAGEMENT AUDIT

Management Audit Financial Audit

6. Audit results Anticipatory Historical
orientation
7. Form of audit Comprehensive report Short form report
report
8. Report user Internal side Eksternal side
 AUDIT STAGE

Preliminary audit

Management control review and testing

Detailed Audit

Reporting

Follow - up
UNDERSTANDING PROBLEMS EARLY

Management
Audit

problem Competitive
ability

Decreased
profit

High employee
turnover 1. Economization
2. Efficiency
High customer 3. Effectiveness
complaints
EFFICIENCY
 Efficiency relates to how the company operates, so that the
optimization of the use of resources is achieved.
 As stated earlier, the management audit aims to identify activities,
programs, and activities that still need improvement, so that with
recommendations given later improvements can be made to the
management of various programs and activities in
EFFECTIVENESS
 Effectiveness can be understood as the level of success of a company to
achieve its goals.
 Effectiveness is a measure of output
Managerial function
in managerial functions, audits are carried out on:
• Planning
Planning is the most crucial stage in the success of the company.
• Organizing
Organizing expressed how the arrangement of resources is done, including the
placement of personnel in the right workplace according to their competence.
• Actuating
Actuating is related to the implementation of the plan, supported by adequate
organizational tools and resources.
• Control
The audit of controlling emphasizes the achievement of the effectiveness of the
control system in guiding the operational process so that it is able to run
economically, efficiently, and effectiveness in achieving goals.
 SCOPE OF MANAGEMENT AUDIT

HRD
AUDITS AUDIT
OTHER MANAGEMENT SYSTEM
AUDITS INFORMATION

QUALITY
MARKETING AUDIT MANAGEMENT ASSESSMENT
AUDITS AUDIT SYSTEM

PRODUCTION ENVIRONMENTAL
AND OPERATION MANAGEMENT AUDIT
AUDITS
TAX AUDIT
 Business Function
 1. Management audit on Marketing Functions Some of the scope of the marketing
management audit are:
a. Marketing environment
b. Marketing strategy
c. Marketing organization
d. Marketing productivity
e. Marketing function
 2. Management audit on production and operating functions Some of the scope of this audit
include:
a. Production planning
b. Quality control
c. Productivity and efficiency
d.Work methods and standards
e. Equipment maintenance
f. Production and operations management organization
g. Plant and layout
 3. Management Audit on Human Resources Functions Some of the scope of this
audit covers the entire HR process which includes:
a. Manpower planning f. Job assessment
b. Employee acceptance g. Career development
c. Selection h. Rewards and compensation system
d. Orientation and placement j. Employee protection
e.Training and development k. Employee relations
l.Termination of employment (PHK)
4. Management Audit on Information System Functions The scope of the audit
includes:
a. Data management unit support
b. Data processing planning
c. Data processing organization
d. Data processing
 5. Management Audit on Quality Assurance System Functions Quality assurance
system audits aim to assess whether the quality assurance system that is
expected by the company has been able to guide the company's operating
process to achieve product quality in accordance with established standards.
 6. Management Audit on Environmental Functions in general the scope of the
environmental management audit includes:
a. Audit environment liabilities
b. Environment management audit
c. Environment activities audit
 7. Management Audit on Environmental Functions the tax function of the
company is actually not only on how the company carries out its tax obligations
properly and in accordance with the applicable tax laws and regulations.
 AUDIT STAGE

Preliminary audit

Management control review and testing

Detailed Audit

Reporting

Follow - up
PRELIMINARY AUDIT
 Preliminary Audit is carried out in order to prepare a deeper audit. This
audit is more focused on the effort to obtain background information
about the audit object.
PRELIMINARY AUDIT STAGE
 Auditor Understanding of Audit Objects
 Determination of Audit Objectives
 Determination of Scope and Objectives of Audit
 Review of regulations and legislation relating to audit objects
 Development of Initial Audit Criteria Preliminary
 Audit Conclusions
MANAGEMENT CONTROL REVIEW AND
TESTING

 management control system must ensure that the company has

implemented its strategy effectively and efficiently.

 The characteristics of a good management control system include the

following:
Statement of company objectives
Company plans used to achieve goals
Adequate quality and quantity of human resources
STEPS IN REVIEWING MANAGEMENT
CONTROL
 Determine the level of significance and sensitivity of the main matters of
the program / activity being audited
 Assess the level of vulnerability of the program to abuse of resources
and deviations from regulations
 Identify and understand management controls
 Determine what is already known about the effectiveness of control
 Assess the adequacy of control design
 Establish through testing whether existing controls are effective enough
 Report the results of the management assessment and discuss the
necessary corrective actions
DETAILED AUDIT
 This audit aims to obtain sufficient evidence to support the actual audit
objectives, which have been determined based on the results of the
review and management control testing.
STEPS IN DETAILED AUDIT
 Gather additional background information on audit objects needed
 Obtain relevant, material and competent evidence
 Summarize the evidence obtained and group it into groups of criteria,
causes and consequences
 Development of Findings in Advanced Audit
 Prepare conclusions on the basis of a summary of evidence that has
been obtained and identify that the consequences of nonconformities
between conditions and criteria are quite important and material. This
conclusion is the consolidation of audit findings
REPORTING
The final part of the management audit process is reporting audit results.
In the presentation of the audit report consists of two ways:
 Presentations that follow the flow of information obtained during the
audit stages.
 The presentation method follows the flow of information that focuses
on the presentation of the interests of users of the audit report.
FOLLOW-UP
 Implementation of follow-up on recommendations provided by auditors
is a form of management's commitment to improve the company's
processes and performance on some weaknesses and shortcomings that
still occur. Even so, the auditor does not have the authority to force the
company to carry out recommendations recommended by the auditor,
but the auditor places himself as a supervisor on the plan, implementer,
and follow-up control carried out. Recommendations should be the
result of discussions and joint formulations between management and
auditors