Purpose:

Internal auditing is an independent

appraisal
function established within an organization
to
examine and evaluate its activities as a
service
the organization.
The objective of internal auditing is to assist
members of the organization in the effective
discharge of their responsibilities.
The audit objective includes promoting control
reasonable
cost.
to

at a
3
The Audit Process
Model
INPUTS PROCESSES OUTPUTS OUTCOMES
Software
and
Organization
in
their
Effective use
of
4
Reputation
for Integrity
and
airness
Pro!ote the
Interna" Contro"
Ti!e and
Money
Supporting the
the #ischarge
of
Responsi$i"itie
s
Co!puters%
II& Standards
&na"yses%
&ppraisa"s%
Reco!!endations
% Counse" and
Infor!ation
Interna" &udit
Practices
and
Procedures
Interna"
&udit
'now"edge
and S(i""s
IIA Statement of
Responsibilities
Scope:

The scope of internal auditing should

encompass
the examination of the adequacy and
effectiveness
of the organizations system of internal control
and the quality of performance in carrying out
assigned responsibilities.
Assessment (adequacy and effectiveness). Enhancement (measurin
performance quality improvement).

5
The !ature of
"usiness
#is$ is a concept used %y
auditors and manaers
to e&press concerns a%out
the pro%a%le effects of an
#is
$
uncertain environment.
6
'ontrol
and
'ontrol mitiates
#is
$
ris$:
Preventive
Contro"
eed$ac(
)oop
INPUT * OUTPUT
Co!pare to
Standard
Criteria
#etective Contro"
eed$ac( )oop
INPUT * OUTPUT
Co!pare to
Standard Criteria
7
PROCESS
PROCESS
Phase I+
Internal
Audit
(rame)or$
Plannin
P"anning the &udit
Performin
Phase II+
#eportin
Perfor!ing the &udit
Phase III+
#ocu!enting the &udit
8
#R&T &U#IT
REPORT
#ISCUSS
CONC)USIO
NS
IE)#,OR'
-TESTIN./
#E0E)OP &U#IT
PRO.R&M
RIS'
&SSESSMENT
PRE)IMIN&R1
SUR0E1
RESE&RC2
&U#IT
&SSI.NMENT
&N# O34ECTI0E
Esta%lishin Audit
*%+ective
and Scope

Ensure a positive lin$ %et)een the audit

o%+ective
and the entity,s oals.
Ensure the audit proram )ill produce the evidence as
required.

Ensure that each test )ill

provide
the evidence
required %y the audit
proram.
)in(ing the &udit
to the 3usiness P"an
&udit Unit Entity
O$5ective .oa"s Purpose
Serving
Custo!er
9
Needs
Plannin
the
Audit

#esearch
#is$ Assessment
Audit Stratey
Preliminary Survey
Policies and
Procedures
Inputs and *utputs
'ontrol Steps
People
10
Plannin Step -.
Perform #esearch on Area under Audit
#esearch is important for understandin/
%ut
must %e a%le to reconi0e )hen 1enouh
is
enouh2
)e
#esearch tells us define the historical issues/
current
issues/ mar$etin issues/ pervasive ris$s/
personnel
issues/ and future issues.
11
Plannin Step -3
Prepare 4our 5ypothesis
.
.
The activity is operatin
normally
!hat is " !hat should #e
3. The activity is not operatin as
it
some sinificant )ay
!hat is does not " !hat should be
Some value in %et)een
There are minor differences %et)een
!hat is and !hat should be
should in
6.
12
Plannin Step -6
.
.
3.
To e&ecutive manaement
Include the name of the audit effort initiation date
and the
6. #equestthe nameof acontact person
13
7esinin Audit Tests
Evidence is created from tests or questions.
The creation of the riht test or question to as$ is a
process of )or$in %ac$)ards from the audit o%+ective.
& )ogica" Se6uence+ ro! Tests to O$5ective
O$5ective
14
&udit
2ypothesis+
What do you
want to prove?
Evidence+
What proves the
hypothesis?
Tests+
What
creates the
evidence
(y/n)?
7ocumentin the
Audit
Automated 8or$ Papers provide

A frame)or$ to uide the audit process.

Support for the conclusions reached %y the
audit.
A record of the
to standards.
audit processand its conformance
15
8or$ Papers 9
:ood
Practices

;se electronic templates to

capture
data:
<
<
<
<
<
"ac$round = Scope
#is$
'ontrol
Test
Audit Point Sheet
7ocument

Structure your )or$ paper

documents
you )ould the final audit report.
as carefully
as
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A
..
3.
6.
(rame)or$ for the
Audit
Audit Stratey> Audit Scope = *%+ective.
'reation of #is$ "ased 8or$ Papers
'ollection of %asic reference
materials
charts/ etc.)
7etermination of tests needed
Sample 7esin
Preparation of meetin aendas
(f lo)
?.
@.
A.
B.
C.
D.
(ollo)Eup on information leaned>reEdirection
7ocumentation of test results and conclusions.
'reation of Audit Point Sheets.
.F. Audit
#eport
17
8ritin ;p
'onclusions
"est practices include:

Test description or
question.
#esults (clearly stated).
'onclusion reachedasa result of that test.
18
"est Practices
(cont)

7iscussion of the conclusion )ith

manaement.
To avoid misunderstandins.
To ive manaement a GheadsEup, a%out issues.
To encourae corrective action as soon as possi%le.
'rossEreference the audit point sheets to the

conclusions in the audit )or$ papers

(and
%ac$E
referenc
e
the conclusions to the report).
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Summari0in and Evaluatin
#esults

The audit process creates

evidence.
The )ogica" Resu"ts+ ro! Tests to indings

Evidence is summari0ed into conclusions.

Evidence (facts) H 'onte&t (impact) I (indin
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IN#IN.
Conc"usion+
Puts
the facts in
conte7t -i!pact/8
Evidence+
Provides factua"
infor!ation8
Test+
Creates the
evidence8
The Audit Point
Sheet

Ensures all aspects of pro%lems

(findins)
captured.
are

;seful as ready
documentation.

Serves as a %asis for discussion.

Aids the summari0ation and report

)ritin.
21
8ritin Effective Audit
#eports
#eports are important %ecause they:

Provide documented communication

assurance to senior manaement.
Provide operatin manaement )ith
and

assessments of operations and corrective

action.
Provide the auditor )ith records for follo)Eup of audit results.
Provide the audit roup )ith mar$etin
opportunities to demonstrate added value.

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(ollo)in ;p 9 'orrective
Actions
The control aspect of auditin is not
complete until corrective action is ta$en
the ris$ formally assumed %y senior
manaement).
Effective statements of corrective action include:
(or

The
The
The
specific steps to %e ta$en/
completion date and
person responsi%le for completion.
23
Audit Interaction
)ith
Auditee
Co!petition Cooperation Co""a$oration
&uditor Manager &uditor Manager &udit Tea!
&uditor Manager
Interna" &udit Interna" &udit Interna" &udit
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"uildin Trust )ith
Auditee
The slo) )ayE Ma$in and $eepin
commitments
The faster )ay
'olla%oration.
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