Internal Auditing Part I

Explore the purpose of internal audits, the difference from external audits, risks and risk-based routing, objectives, controls, and the adequacy and effectiveness of internal controls, plus reporting findings.

Compare external and internal audit, showing how external auditors provide independent opinions on financial statements and compliance, while internal auditors assess internal controls and risk management for board assurance.

Identify inherent risks that can derail organizational objectives, including bad debts, misappropriation, and reputational harm. Recognize residual risk after controls and note the shift to risk-based auditing.

Risk based auditing links internal auditing to the organization's risk management framework and provides assurance to the board on risks relative to appetite and prioritized risks.

Explore internal controls to manage risk and ensure objectives, detailing preventive, detective, and corrective controls, plus segregation of duties, authorization, physical and management controls.

Evaluate the adequacy and effectiveness of internal controls, management's risk handling, and how internal audit findings, including fraud considerations, inform the board and prompt corrective actions.

Identify the main objectives of sections 3 and 4, define the purpose of an internal audit, outline the audit plan, and explain risk assessment, testing, and a closed meeting.

Develop the annual audit plan based on risks identified by managers and the internal audit function, including special audits by management for fraud or irregularities, with audit committee approval.

Understand the process you audit by reviewing documents, standards, and legal requirements to guide your internal audit. Ensure duties are performed as intended and identify gaps to inform recommendations.

Outline the audit notification and opening meeting process, introduce the audit team, set purpose, expectations, and scope, gather process insights, identify client risks, and prepare the internal audit plan.

Sequence the audit steps with the Jerold plan and document the audit planning memorandum to define the process, risks, controls, objectives, and scope, then assess risks and plan testing.

Document warehouse control testing by confirming lock and key access, counting stock samples, and comparing physical counts with system balances; assess discrepancies and report inadequate controls or theft.

Document the test of banking procedures as a control against bad debts. Sample loan records to assess adequacy and compare current-year bad debts with prior years and peers.

Hold a close-out meeting with internal audit and staff after field work, documenting test results and evidence in the audit file to protect credibility and ensure continuity.

Identify the intent and structure of the internal audit report, and understand its findings and purpose as covered in the section.

Explore the structure and purpose of the internal audit report, outlining its sections, findings, evidence, and how the report informs risk management and action by audit committees and boards.

Issue the internal audit report after review, with signed agreement, applying a color-coded risk rating, distributed to executive management, the head of department, and the audit committee.