Internal Auditing
CPA applies inquiry and analytical procedures to financial statements provided by management to determine if they are reasonable. While in an audit, CPA examines financial statements by conferring with outside parties, completing physical inspections and observations, and testing selected transactions by examining supporting documents.
 
Internal auditing is a profession and activity involved in helping organizations achieve their stated objectives. It does this by using a systematic methodology for analyzing business processes, procedures and activities with the goal of highlighting organizational problems and recommending solutions. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.
The scope of internal auditing within an organization is broad and may involve topics such as the efficacy of operations, the reliability of financial reporting, deterring and investigating fraud, safeguarding assets, and compliance with laws and regulations.
Internal auditing frequently involves measuring compliance with the entity's policies and procedures. However, Internal auditors are not responsible for the execution of company activities; they advise management and the Board of Directors (or similar oversight body) regarding how to better execute their responsibilities. As a result of their broad scope of involvement, internal auditors may have a variety of higher educational and professional backgrounds.

Internal auditing activity is primarily directed at improving internal control. Internal control is broadly defined as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following internal control categories:

• Effectiveness and efficiency of operations.
• Reliability of financial reporting.
• Compliance with laws and regulations.
• Safeguarding of assets.

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.

Standards on Internal Audit:
What is internal audit:

“Internal audit is
• An independent management functions,
• involving a continuous and critical appraisal of the functioning of the entity
• To suggest certain improvements and value additions
• To strengthen the governance mechanism of the entity
• including strategic risk management and internal control system
• To provide assurance regarding transparency in reporting.

Objectives:

• To strengthen Governance
• To enhance internal control system
• To assist strategic risk management
• To assure transparency in reporting – both for internal MIS purposes and statutory purposes.

Internal Audit helps
• Understanding and assessment of risks
• Identification of areas for system improvement
• Ensuring optimum resource utilization
• Ensuring timely identification of liabilities – accrued, contingent and potential
• Ensuring compliance – internal and external
• Safeguarding of assets
• Reviewing and ensuring adequacy of IT security
• Reviewing and ensuring adequacy of management information systems.

Objective of Planning
• An Internal Audit Plan is a document defining: Scope, Coverage, and Resources.

􀂃 The Internal auditor should in consultation with, those charged with governance, including Audit Committee, develop and document a plan for each internal audit engagement to help him conduct the engagement in efficient and timely manner.


Scope of Planning
• Internal audit plan covers the following:

1) Obtaining knowledge of:
•Legal & Regulatory framework
• Accounting & Internal Control Systems & Policies.

2) Determining
•Effectiveness of internal controls and policies
•Nature timing and extent of procedures to be adopted.

3) Identifying
•Key Concern areas based on criticality and risk involved.
•Optimum allocation of human resources.
•Reporting responsibilities

4) Setting up:
•Time Budget for all activities.
•Benchmarks for evaluation of actual results of IA.

Principles Governing Internal Audit
• Integrity, Objectivity and Independence
• Confidentiality
• Due Professional Care, Skills and Competence
• Work Performed by Others
• Documentation
• Planning
• Evidence
• Internal Control and Risk Management – suggest improvements
• Reporting
Copyright © Hatem Audit Firm - Privacy Policy
Counter