Internal Audit Practices

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Internal Audit Practices

• A consolidation of suggested and applied models

Punta del Este, Uruguay 28 October 2005
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Agenda
Agenda

• Introduction

• ACSDA Working Committee project

• Next steps

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The Internal Audit landscape

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

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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

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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
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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
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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

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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
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Agenda
Agenda

• Introduction

• ACSDA Working Committee project

• Next steps

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History

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

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Standards
IIA Membership
Argentina Bolivia Brazil Canada Colombia Costa
Rica Equador Mexico Nicaragua Panama Peru South
Africa Trinidad Tobago United States Uruguay
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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
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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?
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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)
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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

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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

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Agenda
Agenda

• Introduction

• ACSDA Working Committee project

• Next steps

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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?

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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
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Thank You