Operational Auditing: Principles and Techniques for a Changing World

Question 1

Internal audit has undergone a significant transformation, adapting to changes in management and organizational behavior.

Answer 1

True

Question 2

What challenged the standard model?

Answer 2

Globalization, technological advancements, and a new business model

Question 3

What is the disadvantage of the standard model?

Answer 3

It limited creativity and adaptability.

Question 4

Why did many internal auditors become irrelevant?

Answer 4

They missed the changes and were slow to adapt to the changing landscape.

Question 5

What happened when the standard model has became impractical?

Answer 5

1. Irrelevance of auditors
2. Loss of confidence of management and board of directors in internal audit functions that focused on outdated practices and failed to provide valuable insights.
3. Managers questioned the value of internal audits, finding them overly focused on compliance and lacking in strategic relevance - disenchantment.

Question 6

What are the three (3) new era of audit?

Answer 6

1. Stakeholder focus
2. Risk-based Approach
3. Integrated Auditing

Question 7

Why did the focus of internal audit shifted toward broader organizational objectives?

Answer 7

Due to the emergence of stakeholder theory and corporate governance principles.

Question 8

What is the risk-based approach?

Answer 8

It focuses on identifying and mitigating risks that could impact the organization’s goals.

Question 9

What is integrated auditing?

Answer 9

It combines operational, financial, and compliance audits. It became essential for providing a comprehensive view of organizational performance.

Question 10

Give three (3) importance of operational audits

Answer 10

1. Strategic Alignment
2. Efficiency and Effectiveness
3. Risk Mitigation

Question 11

How does Operational audit help in strategic alignment?

Answer 11

Operational audits help ensure that business processes are aligned with strategic objectives and contribute to organizational success.

Question 12

How does operational audit result in efficiency and effectiveness?

Answer 12

Operational audits identify opportunities to improve efficiency, effectiveness, and cost-effectiveness of business processes.

Question 13

How does operational audit result in risk mitigation?

Answer 13

Operational audits help identify and mitigate operational risks that could impact the organization’s performance and reputation.

Question 14

What is the future of internal audit?

Answer 14

1. Data Analytics - leverage data analytics to gain deeper insights into organizational performance and identify emerging risks.
2. Technology Expertise - Need to develop expertise in emerging technologies such as AI and blockchain, to effectively audit complex systems.
3. Strategic Advisory - IA will evolve from a compliance function to a strategic advisor, providing insights and recommendations to support organizational goals.

Question 15

What are the key takeways? (3)

Answer 15

1. Adaptability - adaptable and responsive to changing business environment.
2. Risk-based Approach - Essential for identifying and mitigating risks that could impact organizational success.
3. Strategic Alignment - IA should be aligned with the organization’s strategic objectives and contribute to its overall success.

Question 16

What should be done by internal auditors to cope with the changing landscape?

Answer 16

1. Embrace Change
2. Develop Skills
3. Build Relationships - foster relationship to build trust and collaboration
4. Contribute Value - focus on providing valuable insights and recommendations that support organizational goals.

Question 17

It is the primary international professional association, organized on a worldwide basis, dedicated to the promotion and development of the practice of internal auditing.

Answer 17

Institute of Internal Auditors

Question 18

It is the recognized authority, chief educator, and acknowledged leader in standards, education, certification, and research for the profession worldwide.

Answer 18

Institute of Internal Auditors

Question 19

It provides professional and executive development training, educational products, research studies, and guidance to more than 80,000 members in more than 100 countries.

Answer 19

Institute of Internal Auditors

Question 20

It is the conceptual framework that organizes authoritative guidance promulgated by the Institute of Internal Auditors.

Answer 20

International Professional Practices Framework

Question 21

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

Answer 21

Internal Auditing

Question 22

Why is it important to understand the purpose behind activities?

Answer 22

Understanding the purpose behind activities provides provides valuable insights into the effectiveness of processes.

Question 23

What does the questions “who, what, when, where, and how” provide?

Answer 23

They provide valuable information about the process and its behavior.

Question 24

Value of Sustainability Report (4)

Answer 24

1. Transparency
2. Risk management
3. Competitive advantage
4. Stakeholder pressure

Question 25

How does internal auditors add value?

Answer 25

1. Risk Management - Internal auditors play a crucial role in identifying, assessing, and mitigating risks. risks. 2. Governance - Internal auditors provide assurance on the effectiveness of corporate governance structures and practices. 3. Control - Auditors evaluate the effectiveness of controls in preventing and detecting errors and fraud.

Question 26

It is a future-oriented, independent, systematic, and business-focused evaluation of management and the organization's activities controlled by management and third parties.

Answer 26

Operational auditing

Question 27

What is an important aspect of the modern manager and auditor's job?

Answer 27

Identify relevant stakeholders and to understand their interests.

Question 28

Who are the primary (economic) stakeholders?

Answer 28

1. Employees 2. Investors 3. Creditors 4. Customers 5. Suppliers

Question 29

Who are the secondary (noneconomic) stakeholders?

Answer 29

1. Governments 2. General public 3. communities 4. Business support groups 5. Activist groups 6. Media

Question 30

It is an important aspect of modern internal auditing because it gives the auditor an appreciation for the various parties interested in the outputs and outcomes of the organization, its programs and related processes.

Answer 30

Stakeholder analysis

Question 31

It requires a broader view of organizational risks, going beyond accounting and financial risks.

Answer 31

Risk-based auditing

Question 32

They must identify, measure, and assess mechanisms to mitigate risks such as delays, waste, inefficiency, poor customer service, and system failures.

Answer 32

Internal auditors

Question 33

Why is it beneficial to diversify auditing?

Answer 33

This enriches the department and provides valuable insights into other risks affecting the organization.

Question 34

It focuses on identifying and evaluating internal controls without enough regard to their value to the process.

Answer 34

Controls-based auditing

Question 35

What are operational threats? (3)

Answer 35

1. Strategic threats 2. Technological threats 3. Environmental threats

Question 36

What are the essential skills (3) for effective operational audits?

Answer 36

1. Communication skills 2. Problem identification and solution skills, such as conceptual and analytical thinking 3. Industry and Regulatory Knowledge

Question 37

In the IIA Research Foundation Core Competencies Report, what are the top general competencies of internal auditors?

Answer 37

1. Communication skills, such as oral, written, report writing, and presentation skills 2. Problem identification and solution skills, such as conceptual and analytical thinking 3. Ability to promote the value of internal audit 4. Knowledge of industry, regulatory, and standards changes 5. Organization skills 6. Conflict resolution/negotiation skills 7. Staff training and development 8. Accounting frameworks, tools, and techniques 9. Change management skills 10. IT/CT 13 framework, tools, and techniques 11. Cultural fluency and foreign language skills

Question 38

What are the behavioral skills that internal auditors should possess?

Answer 38

Confidentiality Objectivity Communication Judgment Work well with all management levels Possess governance and ethics sensitivity Be team players Relationshp building Leadership Influence Facilitation Staff management Change catalyst skills