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Internal Audit Practices

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Title: Internal Audit Practices


1
Internal Audit Practices
  • A consolidation of suggested and applied models

Punta del Este, Uruguay 28 October 2005
2
Agenda
Agenda
  • Introduction
  • ACSDA Working Committee project
  • Next steps…

3
The Internal Audit landscape
  • Changing / troubled economic world
  • Damaged Investor confidence
  • Global instability
  • Internal Audit is at the epicentre

4
and NOW….
  • Do you want to be a Rock star?
  • Lyrics written and performed by Third Day
  • Internal Auditors are Rock Stars now
  • Quote by the CFO, Pitney Bowes, February 2004

5
What is Internal Auditing?
  • Internal Auditing is an independent, objective
    assurance and consulting activity designed to add
    value and improve an organisations operations.
    It helps an organisation accomplish its
    objectives by bringing a systematic, disciplined
    approach to evaluate and improve the
    effectiveness of risk management, control and
    governance processes

As defined by…
6
Independence
I Swear… that to the best of my knowledge
(which is pretty poor and may be revised in
future), my companys accounts are (more or
less) accurate, I have checked this with my
auditors and directors who (I pay) agree with
me…
CEO
Adapted from a cartoon which appeared in The
Economist
7
Adding value
  • Why does a car have brakes?
  • Provide assurance on existing information
  • Provide new information?
  • Is it key?
  • What are we measuring?
  • What impacts do our opinions have?
  • Directors personal liability
  • Jobs
  • Balance the Governance, Risk Compliance
    (GRC) equation
  • Internal Audit should monitor and evaluate the
    effectiveness of an organisations
  • risk management system

8
Key elements of Governance
  • Key elements of governance
  • The Board
  • Management
  • External Auditors
  • Internal Auditors
  • Internal Audit role being
  • enhanced
  • Three key trends emerging
  • Enhanced reporting relationships
  • Assisting the Board of Directors
  • Fostering organisational ethics

Board
Effective Governance
External Audit
Internal Audit
Management
9
Agenda
Agenda
  • Introduction
  • ACSDA Working Committee project
  • Next steps…

10
History
  • Project initiated in 2004
  • 1st report-back Cartagena, Colombia

11
Standards
IIA Membership
Argentina Bolivia Brazil Canada Colombia Costa
Rica Equador Mexico Nicaragua Panama Peru South
Africa Trinidad Tobago United States Uruguay
12
Staffing
  • Responses received from 11 Members…
  • 3961 employees
  • 112 Internal Auditors
  • 22 Certified Information System Auditors
  • 19 Certified Professional Accountants (CPA)
  • 5 Chartered Accountants (CA)
  • 3 Certified Internal Auditors (CIA)
  • 1 Certified Information System Security
    Professional (CISSP)
  • 1 Certified Financial Services Auditor (CFSA)

2.8
13
Frameworks
Models identified
  • Outsource
  • Pay someone else to do it
  • Insource
  • We can do it ourselves, thank you
  • Co-source
  • Lets do it together

Deciding Factor How best do we achieve what we
need to do?
14
Role Function of Internal Audit
  • An effective internal audit function should
    provide
  • Assurance that the management processes are
    adequate to identify and monitor significant
    risks
  • Confirmation of the effective operation of the
    established internal control systems
  • Credible processes for feedback on risk
    management and assurance and,
  • Objective confirmation that the board receives
    the right quality of assurance and information
    from management and this information is reliable.

King report on Corporate Governance in South
Africa (King II)
15
Frameworks and Audit tools
Framework   a supporting or underlying structure
Tool a thing used to help perform a job
Oxford English Dictionary
  • Frameworks
  • COSO, CObIT, ISO Standards (eg ISO 17799)
  • Tools
  • ACL, IDEA, ProAudit, Teammate

16
Reporting lines…
  • Internal Audit should report to a level within
    the company that allows it to accomplish its
    responsibilities.
  • The Head of Internal Audit should report-
  • administratively to the Chief Executive Officer
  • functionally to the Chairman of the Audit
    Committee and,
  • should have regular access to the Chairman of the
    Board

17
Agenda
Agenda
  • Introduction
  • ACSDA Working Committee project
  • Next steps…

18
Best Practice
  • As a profession we are in the enviable position
    of enjoying a high level of harmony across
    international boundaries through the IIA
  • Can we build on this?
  • How best do we use this to enhance our
    function within the industry?

19
Quality Assurance
  • International Standards for the Professional
    Practice of Internal Auditing (Standards)
  • 1330 Use of Conducted in Accordance with the
    Standards

Related Standard 1330 Use of Conducted in
accordance with the Standards
Internal auditors are encouraged to report their
activities are conducted in accordance with the
International Standards for the Professional
Practice of Internal Auditing (Standards).
However, Internal Auditors may use the statement
only if assessments of the quality improvement
program demonstrate that the internal audit
activity is in compliance with the Standards
20
Thank You
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