Internal Auditing: A Profession of Value
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Presenter:
Organization
Date
Presentation
is complements of The IIA Academic Relations
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“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
.”
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Broad focus
–
Accurate financials
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Efficiency/effectiveness
–
Accomplishing objectives
–
Compliance w/laws, policy
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Safeguarding assets
–
And more!
•
Diverse skills sets are
required
•
Integral part of the
organization
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Specific focus
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Accurate financial statements
–
Going concern
–
Reviewing historical data
–
Compliance with accounting
and other regulations
•
Primarily accounting skills
•
Independent from the
organization
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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
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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?
F
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C
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K
S
•
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
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Board of Directors
Management
External Audit
Internal Audit
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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
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Find out what’s working and what’s 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
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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
W
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O
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D
Y
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…
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If someone asked you
whether or not
their
organization needed
internal auditors?
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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
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?
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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?
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C
E
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F
R
A
M
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W
O
R
K
•
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
www.theiia.org
or
https://global.theiia.org
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Welcome the students and lightheartedly tell them that you believe everyone will want to be an internal auditor after they hear this presentation.
Before showing the next slide ask the group how they would define internal auditing.
For those answers not correctly answering the question, ask directing questions to get the students to begin to develop a broad definition and then say, let’s see what The Institute of Internal Auditors has to say about internal auditing.
Internal auditing is an independent, objective activity that enhances organizational operations by evaluating risk management, control, and governance processes. Internal auditors assess risks, evaluate controls, suggest improvements, ensure compliance, and detect fraud. They play a crucial role in effective governance alongside the board of directors, external audit, and management.
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Presentation Transcript
GETTING TO KNOW INTERNAL AUDITING THE PROFESSION THAT MAKES A DIFFERENCE Presenter: Organization Date Presentation is complements of The IIA Academic Relations
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 Financial Statement Audit Broad focus Accurate financials Efficiency/effectiveness Accomplishing objectives Compliance w/laws, policy Safeguarding assets And more! Diverse skills sets are required Integral part of the organization Specific focus Accurate financial statements Going concern Reviewing historical data Compliance with accounting and other regulations Primarily accounting skills 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 External Audit Internal 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 Key Stakeholders Audit committee/ board CEO CFO or individual to whom CAE reports administratively Potentially, other chief officers Secondary Stakeholders Other business unit executives External auditors and regulators Investors and creditors (Government audit) citizens and taxpayers Tertiary Stakeholders Employees and retirees Investment analysts Potentially, the general public
INTERNAL AUDITORS Find out what s working and what s 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 IPPF Book 2011 www.theiia.org or https://global.theiia.org
