1 1 internal audit annual planning, engagement planning and execution
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INTERNAL AUDIT ANNUAL PLANNING, ENGAGEMENT
PLANNING AND EXECUTION
1Internal Audit Annual Planning, Engagement Planning and
Execution
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• Annual Audit Planning,• Engagement Planning,• Engagement Execution.
SESSION PLAN
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Calculation of Total Available Resources,Allocation of Total Available Resources among appropriate
engagements,Assignment of staff to the appropriate engagements, Coordination of annual plan with other assurance providersContinued review of the Actual vs Annual Plan.
Elaboration of Annual Plan
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Available Resources Necessary Resources<
Integration of External Resources
Integration of External Resources
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Should be derived from Internal Audit Strategic Plan,
Details allocated time and resources for each engagement and provides more detailed information to the user compared to Strategic Plan,
Resource allocation is made based on experience and competences of the team members.
Allocation of resources andassignment of staff
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External Audit, External assessment of internal audit activity, Inspections undertaken by various public authorities.
Coordination of annual plan with other assurance providers
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Engagement cannot be planned if not included in the annual plan,
For non planned engagements, annual plan is revised,Changes made to the activity of the entity (auditee),Changes made to the assessed risks of the entity
(auditee),Changes made to the resource plan,Errors/omissions identified in prior year annual plan,
that should be included in the present annual plan.
Actual vs Annual Plan
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1• PLANNING
2• EXECUTION
3• REPORTING
4• FOLLOW UP
ENGAGEMENT MANAGEMENT PHASES
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1) Composition of audit team and kick-off meeting with the team and auditee,
2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.
Engagement Planning: Phase 1
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Independence of auditors,Scope and nature of activities of the auditee,Risk grade of the auditee, Competence of the staff, Training needs.
Composition of audit team
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Kick of meeting with the team
Nature, stance and timing of
the work
Kick off meeting with auditee
Demanded information, timing of the
works
Kick off meetings
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1) Composition of audit team and kick-off meeting with the team and auditee,
2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.
Engagement Planning: Phase 1
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Legal acts regulating activity of the auditee,Charter of the auditee,Prior period engagement files,Job descriptions of the auditee staff,Risk register provided by the auditee,External audit reports,Reports provided by other assurance providers.
Preliminary survey
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Risk groupInternal
control risk grade
Overall risk grade
Risk Reassessment
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1) Composition of audit team and kick-off meeting with the team and auditee,
2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.
Engagement Planning: Phase 1
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Should be derived from annual plan,Should be based on risk assessments,Should be based on the internal controls of the
auditee, Should be based on the risk grade of the auditee,Should provide link to auditee’s objectives
Audit objectives
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1) Composition of audit team and kick-off meeting with the team and auditee,
2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.
Engagement Planning: Phase 1
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Audit team in charge should decide: Internal controls to be tested, Timing of tests, Stance of the tests.
Audit scope should be sufficient enough to achieve the audit objectives
Audit scope
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The audit program defines:Audit objectives, Audit procedures/tests,Audit assertions.
Audit program
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Appropriate
Sufficient Quantity
Quality
Audit evidence
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Completeness
Existence
Cut off
Legality
Presentation
Obligations and rights
Accuracy
Valuation
CEAVOP&L
Audit Assertion
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Verification Observation
External confirmation
InquiryRe-performance
Recalculation
Analytical procedures
Audit techniques
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Audit tests
Substantive tests Control tests
Test of details Analytical tests
Testing design and implementation of internal control
Testing operating effectiveness of internal controls
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Audit techniques
• Verification• Recalculation• External confirmation• Analytical procedures• Inquiry
Substantive tests Control tests
• Verification• Observation• Re-performance• Inquiry
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Control systems
Preventive control systems
Detective control systems
Intern control systems
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Audit techniques
Audit tests
Audit asserti
ons
Control syste
m of the
entity
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1 • PLANNING
2 • EXECUTION
3 • REPORTING
4 • FOLLOW UP
ENGAGEMENT MANAGEMENT PHASES
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1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
Engagement Execution: Phase 2
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Internal control system documentation/description of the auditee,
Walkthrough testing,Identification of internal control design
weaknesses and conclusion on effectiveness of the system
Testing design and implementation of control
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Public sector entityDepartment of
cash operations of MoF (auditee)
Central Bank of Armenia
Contract
Yes/No
Payment Order
Approved Invoice
Payment
Refusal
Information Flow Chart
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31Internal Audit Annual Planning, Engagement Planning
and Execution
Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
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• The nature of the tests,• The timing of the tests,• The stance.
Testing operating effectiveness of control
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During the organization of a sample the following points should be observed:Type of sampling,Sample size,Detected errors and extrapolation of the results.
Sampling
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Statistical samplesRandom,Systematic,Sequential,Monetary Unit Sampling (MUS).
Non-statistical sampling haphazard sampling, Snowball sampling.
Sampling Types
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and Execution
Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
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Substantive tests
Test of details Analytical tests
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- Examination of supporting documentation, - Errors and omissions are detected,- The nature and extent of tests depends on:• Risk grade of the auditee,• Results of control tests,• Fraud risk.
Substantive tests
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38Internal Audit Annual Planning, Engagement Planning
and Execution
Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
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Audit objective,Work done,Audit assertions,Results of the work, including errors, omissions and
weaknesses identified, audit evidence,Auditor judgement fo achieving audit objective,Audit objective conclusion,Who has prepared the WP,Date of the WP.
Preparing audit WP (working papers)
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40Internal Audit Annual Planning, Engagement Planning
and Execution
Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
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All the WPs should be reviewed by both team in charge and Chief Internal Auditor,
Appropriateness of reached conclusions,Conduct of on job training and
supervision.
Review of the WP
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42Internal Audit Annual Planning, Engagement Planning
and Execution
Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.
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Predefined formatCriteria,Condition, Cause, Effect.
Exception Report
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• Exception report produced based on the WPs,• Closing meeting with auditee– Discussing errors, omissions and internal control
weaknesses,– Exception report.
Wrap up and Closing Meeting
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