Internal Auditing

• Independent

• Objective

• Assurance and consulting activity

• Adds value

• Improves operations

• Helps accomplish objectives

Purpose:

Internal auditing is an independent appraisal function established within an organization to examine and evaluate its activities as a service to the

organization.

The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities.

IIA STATEMENT OF RESPONSIBILITIES

Internal Auditing

Brings a systematic and disciplined approach to evaluate and improve

the effectiveness of the

Governance, Risk Management,

& Control.

INTERNAL AUDITORS’ ROLE

“Eyes & Ears”

“Policeman”

“Watchdog” “Consultant”

“Catalyst”

INTERNAL AUDIT

FRAMEWORK

Planning

Performing

Reporting

5

Audit

Assignment

& objective

Research

Preliminary Survey

Risk Assessment

Develop audit Program

Fieldwork (Testing)

Discuss Conclusions

Draft audit Report

Phase I:

Planning the audit

Phase II:

Performing the audit

Phase III:

Documenting the audit

Adherence to the Standards.

Compliance with the Definition of Internal Auditing and the

Code of Ethics.

“Competency, Maintaining Quality &

Continuous Improvement”

Relevance, ongoing professional development.

Professionalism Means:

RISK ASSESSMENT

THE AUDIT PROCESS MODEL

Internal Auditing and Quality

Nobody in the organization better understands the need for independence and objective assessment of quality than do the internal auditors. We audit, review, and assess the work of others on a daily basis. So we can better understand the great value, audit can bring to the entire organization.

Internal Auditing and Quality

To ensure consistent quality in this dynamic environment, an ongoing commitment to growth and improvement is essential. The International Standards for the Professional Practice of Internal Auditing mandate that the internal audit activity be assessed for quality.

www.theiia.org

Steps to ensure & increase quality in audit

Establishing Audit Objective and Scope

Planning the Audit

Designing Audit Tests

Documenting the Audit

Following and complying framework for the Audit

Writing Up Conclusions

Summarizing and Evaluating Results

Effectiveness in Audit Report

Following up - Corrective Actions

Ensure a positive link between the audit objective and the organizations'

goals.

Ensure the audit program will produce the evidence as required.

Ensure that each test will provide the evidence required by the audit

program.

Linking the Audit to Organizations’ Plan

ESTABLISHING AUDIT OBJECTIVE

AND SCOPE

CODECs’

Purpose

Unit

Goals Audit

Objectives

Perform Research on Area under Audit:

a) Research is important for understanding, but we must be able to recognize when “enough is enough”

b) Research tells us define the historical issues, current issues, marketing issues, pervasive risks, personnel issues, and future issues.

Prepare Your Hypothesis:

a) The activity is operating normally

What is = What should Be

b) The activity is not operating as it should in some significant way

What is does not = What should be

PLANNING

Evidence is created from tests or questions.

The creation of the right test or question to ask is a process of working backwards from the audit objective.

DESIGNING AUDIT TESTS

Evidence:

What proves the

hypothesis?

Tests:

What creates the

evidence (y/n)?

Hypothesis:

What do you

A Logical Sequence: From Tests to Objective

Audit

Objective want to prove?

Good Documentation provides:

A framework to guide the audit process.

Support for the conclusions reached by the audit.

A record of the audit process and its conformance to standards.

DOCUMENTING THE AUDIT

Good Practices on Audit Documentation:

Use documentary index to capture data:

a) Background & Scope Document

b) Risk

c) Control

d) Test

e) Audit Point Sheet

Structure your documentation as carefully as you would the final audit report.

DOCUMENTING THE AUDIT

CODEC Audit Manual.

CODEC Loan & Savings Policy.

Microcredit Regulatory Authority Act 2006 (MRA

Act).

Microcredit Regulatory Authority Rules 2010 (MRA

Rules)

Bangladesh Standards on Auditing (BSA).

International Professional Practice Framework

(IPPF).

Donors‟ Standards & Compliances.

FOLLOWING AND COMPLYING

FRAMEWORK FOR THE AUDIT

Good Practices:

Test description or question.

Results (clearly stated).

Conclusion reached as a result of that test.

Discussion of the conclusion with management.

To avoid misunderstandings.

To give management a „heads-up‟ about issues.

To encourage corrective action as soon as possible.

Cross-reference the audit point sheets to the conclusions in the audit work papers (and back-reference the conclusions to the report).

WRITING UP CONCLUSIONS

The audit process creates evidence.

The Logical Results : From tests to findings

Evidence is summarized into conclusions.

Evidence (facts) + Context (impact) = Finding

SUMMARIZING AND EVALUATING

RESULTS

Tests:

Creates the

evidence

Evidence:

Provides factual

information

Conclusions:

Puts the facts in

Context (Impact)

Findings

The control aspect of auditing is not complete

until corrective action is taken (or the risk

formally assumed by senior management).

Effective statements of corrective action include:

The specific steps to be taken,

The completion date and

The person responsible for completion.

FOLLOWING UP – CORRECTIVE

ACTIONS

3C

Competition Cooperation Collaboration

AUDIT INTERACTION WITH

AUDITEE

Auditor Management

Internal Audit

Auditor Management

Internal Audit

Auditor

Management

Internal Audit

The slow way- Making and keeping

commitments

The faster way - Collaboration.

BUILDING TRUST WITH AUDITEE