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Internal Audit Practices

Internal Audit Practices. A consolidation of suggested and applied models. Punta del Este, Uruguay 28 October 2005. Agenda. Agenda. Introduction. ACSDA Working Committee project. Next steps…. The Internal Audit landscape. Changing / troubled economic world Damaged Investor confidence

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Internal Audit Practices

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  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, objectiveassurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of riskmanagement, 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 company’s 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 appearedin 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 organisation’s risk management system

  8. Key elements of Governance Board • 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 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 Frameworks COSO, CObIT, ISO Standards (eg: ISO 17799) Tools ACL, IDEA, ProAudit, Teammate Tool a thing used to help perform a job Oxford English Dictionary

  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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