Ch.A, Topic 1: Define and Break Down the Definition of Internal Auditing

Question 1

Definition of Internal Auditing

Answer 1

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Question 2

Internal Audit Activity Defined (standards glossary)

Answer 2

a department, division, team of consultants, or other practitioners that provides independent, objective assurance and consulting services designed to add value and improve an organization’s operations

Question 3

Internal auditing activities are often referred to with the acronym

Answer 3

GRC (governance, risk, and control)

Question 4

Effective internal auditors serve as an organization’s…

Answer 4

corporate conscience and advisers for operational efficiency, internal control, and risk management.

Question 5

Effective internal auditors educate and make recommendations to…

Answer 5

management and the board of directors (&/or other governance oversight bodies) to support the organization in meeting its goals and objectives.

Question 6

To be effective, internal auditors must demonstrate the following characteristics:

Answer 6

Professionalism
Objectivity
Knowledge
Integrity
Leadership

Question 7

All stakeholder confidence in auditors’ work rests on this foundation:

Answer 7

Organizational independence and individual objectivity. These form the foundation of internal auditing.

Question 8

Chief Audit Executive (standards glossary)

Answer 8

“a person in a senior position responsible for effectively managing the internal audit activity in accordance with the internal audit charter and the Definition of Internal Auditing, the Code of Ethics, and the Standards.”

Question 9

Organizational Independence Exists if the CAE:

Answer 9

1. Reports FUNCTIONALLY to the board
2. Has direct and unrestricted access to the board.
3. Reports ADMINISTRATIVELY to the CEO or similar head of the organization or to some other organizational level so long as the IA activity controls the scope of work, the performance of the work, and the reporting of results without interference.

Question 10

Stakeholders need to know internal auditors can review:

Answer 10

any area of the organization without being biased themselves or unduly influenced by others.

Question 11

Objectivity requires internal auditors to:

Answer 11

avoid a conflict of interest of the appearance thereof.

Question 12

Consulting expands the role of Internal Auditing into areas of:

Answer 12

Value added advice and suggestions related to future-oriented decisions.

Question 13

What would compromise auditors independence when providing advice or suggestions in consulting engagement:

Answer 13

If the auditor had the power to make any decisions themselves or the appearance of having the power to make decisions themselves.

Question 14

Governance (standards glossary)

Answer 14

“combination of processes and structures implemented by the board to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives.”

Question 15

Internal Auditor’s can help ensure organization has 3 things:

Answer 15

1. Proper “tone at the top.”
2. Proper management and operating methodology
3. ethics and integrity

Question 16

Internal Auditor’s can ensure risk taking is truly

Answer 16

within the organization’s risk appetite in the organization’s ability to take risks (sufficient cash reserves and flow) and boards stated willingness to assume risks in specific areas.

Question 17

What are 3 interconnected activities for an enterprise:

Answer 17

Risk, Control, and Governance (RCG). Successful organizations don’t choose one over another. Recognize powerful interplay and benefits of the 3.

Question 18

Risk Control and Governance Determine an organizations…. activities support

Answer 18

ability to succeed in its marketplace…..healthy interactions with stakeholders.

Question 19

Risk, Control, and Governance activities require that an internal auditor is

Answer 19

proficient in each of the three activities. Must evaluate and contribute to the improvement of risk management, control, and governance systems.

Question 20

IIA is committed to a broad view of IA that includes

Answer 20

consulting as well as assurance and that focuses on helping management meeting organizational objectives rather than only traditional attestation of FC statements. ~ Value Added Activities.

Question 21

IIA Standard 1110 states that the CAE must

Answer 21

confirm to the board, at least annually, the organizational independence of the internal audit activity.

Question 22

Internal auditors must be proficient in each of the three activities….

Answer 22

Managing risk
Maintaining effective internal controls
Assess and make recommendations for improving governance in accomplishing it’s objectives.

Question 23

Help an Organization Manage Risk by (3):

Answer 23

1. Identify & evaluate significant exposure to risk
2. contribute to improvement of risk mgmt and control systems.
3. Monitor and evaluate the risk mgmt system

IA Activity MUSTS determine the best way to accomplish the activities in these 3 areas.

Question 24

Help organization maintain effective internal controls by (2):

Answer 24

1. Evaluate the effectiveness and efficiency of controls.

2. Promote the continuous improvement of the control environment.

Question 25

Help an organization assess and make recommendations for improving governance in its accomplishment of the following objectives (4):

Answer 25

1. Promote appropriate ethics and values within the org. 2. Ensure effective org performance mgmt and accountability. 3. Effectively communicate risk and control info to appropriate areas of the org. 4. effectively coordinate the activities of and communicating info among the board, external and internal auditors, and management.