Introduction to Internal Auditing

Week 1

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Discussion Points
What is Internal Auditing? What does an internal auditor do? Why consider the profession of internal auditing? Professionalism

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Definition of Internal Auditing

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organizations 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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Internal Auditing . . .
Bringing a systematic and disciplined approach to evaluating and improving the effectiveness of the organizations:
risk management control governance processes.

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Traditional Roles Of An Internal Auditor

Ensuring the Accuracy of Financial Records
Internal auditing was an extension of the accounting department Tick and Tie Auditor
Counting Inventories Verifying Petty Cash Auditing Payroll Records Audit by re-doing tasks
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Transitional
Emergence of Operational Auditing
More focus on controls within the organization Assumed a Management Consultant role

Checked compliance with company policies and procedures

Evaluated the effective and efficient use of resources Investigated fraud and other special events such as mergers.

Outsourcing and Co-sourcing

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Current Roles
Serves the Entire Organization Independent from Operating Management Partners with Management Participates with Improvement Teams & Task Force Processes Uses Technology

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The IIA says as a Profession for the 21st Century

We know more about modern risk and control models than any other group. We understand the organizations culture as well as management. We can recognize, pro-act and react to risk We are organized globally and address the most important strategic issues.
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Cornerstones for Corporate Governance

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Internal auditors
Function as one of the cornerstones of good governance Improve an organizations operations Provide value-added services Help the organization accomplish its objectives Come from all disciplines

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What Is It Like To Be An Internal Auditor?

Entry-level Responsibilities Gain An Understanding of Organization Operations, Policies, and Procedures
Learn The Business

Develop Understanding of Audit Techniques Enhance Interpersonal Skills Develop Written and Verbal Communication Skills Enhance Computer Skills
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With More Experience

Auditor-In-Charge Responsibilities:
Supervise Staff Manage Audits Train and Develop New Staff Develop Teamwork Solve Problems Build Rapport With Management
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With Even More Experience

Management Responsibilities
Building Rapport With Senior Management and Audit Committee Serving in an Advisory Capacity

Training and Advancing Staff Competencies

Developing Audit Plans and Budgets Participating in Professional Organizations

Being a Valuable Resource for Improving the Organization

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Why be an internal auditor?

Growing Profession Good Starting Salary Great Opportunities High Visibility

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Erosion of Public Trust in Corporate Governance

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Impact on IA

Time Magazine persons of the year 2002

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Impact on IA

Re-engaging on Controls
Sarbanes-Oxley is all about controls Who knows controls better than
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The Profession of Internal Auditing

Allows for high-level understanding of the organization and industry Exposure to senior-level management Transferable skills/disciplines Networking opportunities Expanding Profession Potential travel

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What Can an Internal Auditor Really Do?

With all this information at your finger tips, the skys the limit. Provide assurance services Provide consulting services Monitor and Evaluation the Organizations Risk Management System Recommend improvements and corrections Work with Management In a phrase: Add value to your organization.
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The Internal Auditor of Tomorrow

Business Experience and Focus Expert in Risk Management Strong technology skills Strong understanding of the business Language skills Certification credentials
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Attributes Of A Successful Internal Auditor

Objectivity Good Business Knowledge Good Negotiator Active Listener Creative, Inquisitive, Problem Solver Confident Intuitive
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Characteristics of a Successful Internal Auditor

Exceptional Communication Skills Reasoning Skills Technology skills Analytical skills People and Social skills Language skills Problem Solving skills
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Focus for Tomorrows Internal Auditor

Scope will expand further into governance and risk Need to expand in areas of expertise and facilitation skills Aggregator for assurance and consulting services Assist the organization manage business risk
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Promoting The Profession

The IIA through its motto Progress Through Sharing has established an effective network within the profession

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The IIA Vision

To be the global voice of the internal auditing profession: advocating its value, promoting best practice, and providing exceptional service to its members.
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Strategic Objectives

Advocacy Globalization Service to Members

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Advocacy

Increased advocacy
to be recognized as the global voice for the internal audit profession

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Advocacy
Fostering relationships with key stakeholder organizations Monitoring and commenting on draft legislation around Appearing before various boards and governing bodies Responding to regulators: SEC, PCAOB, INTOSAI, GAO, AICPA, ISO, IFAC, OSC, NACD, FEI, COSO, CICA Developing position papers
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Advocacy Actions
IIA Position Papers: IAs role in ERM IAs role in Sarbanes-Oxley IAs role in expressing an opinion on internal control

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Globalization
Coordination with all IIA Affiliates Global capacity developing countries Global committee structure Global products & services

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Globalization

Furthering best practices in developing nations

Governance Best practices Quality auditing Marketing the profession

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Service to Members
Knowledge resource on best practices Resource for evolving professional development needs Technology guidance

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Internal Auditing A Profession for the 21st. Century?

The world will not value a Profession that provides what the world needed yesterday. It is difficult to imagine a profession whos members are not certified in its practice.
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Exercises
1. Define Internal Auditing 2. Explain relationship between accounting & auditing 3. Internal Auditing Vs External Auditing? 4. Define what is Financial Audit, Compliance Audit and Operational Audit. 5. According to Sawyers views (refer to text book- chapter 1) Internal Audit can assist top management in what way?

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Thank You

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