Internal Auditing Flashcards
ISA 315 deals with…
ISA 315=” Identifying + assessing the risks of material misstatement through understanding the entity and its environment.”
The auditor’s responsibility to identify + asses the risks of material misstatement in the F.S, through understanding the entity and its environment, including the entity’s internal control.
Monitoring of controls - The auditor should obtain an understanding of:
- The nature of the internal audit function’s responsibilities
- Its org. status
- The activities performed
Monitoring of controls - Objectives and scope, the nature of responsibilities and the status within the org. of internal audit vary widely depending on:
The size + structure of the entity.
The requirements of mgmt + those charged with governance.
When is internal auditing’s work RELEVANT to external auditors?
When internal auditing responsibilities include performing procedures + evaluating results to provide assurance regarding: design and effectiveness of risk mgmt, internal control and governance processes.
When is internal auditing’s work NOT relevant to external auditors?
When it’s focused on evaluating: the economy, efficiency and effectiveness of operations - not directly related to the entity’s fin. reporting
ISA 610/615 - Using the work of internal auditors
External auditor’s responsibilities includes ?
a. ) Using the work of the internal audit function in obtaining AUDIT EVIDENCE
b. )Using internal auditors to provide DIRECT ASSISTANCE under the direction, supervision and review of the external auditor.
Does the sole responsibility change when he relies on the internal audit?
NO, his sole responsibility remains the same:
Audit Fin.Statements + provide an opinion
Which 3 things must the external auditor evaluate when determining whether the work of internal auditing can be used?
- ) Org. status + revelvant policies/procedures that support the OBJECTIVITY of the internal auditors.
- ) Level of COMPETENCE of the internal audit function
- ) If the internal audit function applies a systematic +disciplined approach, including QUALITY CONTROL
Further steps using the work of internal auditors
- Coordination
- If it’s properly planned, performed, supervised, reviews and documented
- If sufficient evidence has been obtained
- Evaluating judgement involved, and assessed risk of material misstatement.
DEFINITION OF INTERNAL AUDITING
“Internal auditing is an independent objective assurance and consulting activity designed to add value and improve an org’s operations. It helps an org. accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk mgmt, control and governance processes.
INDEPENDENCE in internal audit
Organizational position. About where you are placed in the reporting line
The chief audit executive must report to a level within the org. that allows the internal audit activity to fullfill its responsibilities.
OBJECTIVITY
Impartial, unbiased attitude of internal auditors
Avoid any conflict of interest
Details of an impairment to independence of objectivity must be disclosed to the appropriate parties.
ASSURANCE SERVICES
An objective examination of evidence for the purpose of providing and independent assessment on governance, risk mgmt, and control processes. for the org.
Ex: financial,performance,compliance,system security, due diligence “engagements”
3 party relationship: company, auditor, person receiving report
Intended to improve the quality information
CONSULTING SERVICES
Advisory and related client service activities, the nature and scope of which are AGREED with the client, are intended to add value and improve an org’s governance, risk mgmt and control processes without the internal auditor assuming mgmt responsibility.
Ex. consel, advice, facilitation, training
2 party relationship
How has internal auditing changed over time?
Firstly most focus on control
then focus on risk
then governance
today on all three areas.
