Professional Documents
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YEAR: 2018-19
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CHAPTER-1 INTRODUCTION
The term most commonly refers to audits in accounting, internal auditing and
government auditing, but similar concepts also exist in ,project management,
quality management, water management and energy conservation.
The scope of internal audit within an organization is broad and may involve topics
such as an organization's governance, risk management and management controls
over efficiency/effectiveness of operations (including safeguarding of assets), the
reliability of financial and management reporting and compliance with laws and
regulations.
Internal audit may also involve conducting proactive fraud audits to identify
potentially fraudulent acts; participating in fraud investigations under the direction
of fraud investigation professionals, and conducting post investigation fraud audits
to identify control breakdowns and establish financial loss. Internal audit is an
audit conducted by an internal auditor appointed by the management of the
enterprises with a view to highlighting the weak areas of the organizations. It
includes examination and evaluation of various organizational activities and to
produce the helping hand to the management complete their responsibilities
efficiently and effectively.
The institute of internal auditor has defined internal auditing as follows: “ Internal
auditing is the independent appraisal activity within an organization for the review
of the accounting, financial and other operation as a basis for protective and
constructive service to the management.control.
The internal auditor audits the accounts and other relevant records daily, regularly
or on periodical basis to accomplish
2. To check whether the existing internal control system is adequate and effective
3. To ensure that all the assets of organization are properly safeguarded, if not, he
them.
science after World War II. It is conceptually similar in many ways to financial
auditing by public accounting firms, quality assurance and banking compliance
activities.
While some of the audit technique underlying internal auditing is derived from
management consulting and public accounting professions, the theory of internal
auditing was conceived primarily by Lawrence Sawyer (1911-2002), often
referred to as "the father of modern internal auditing"; and the current philosophy,
theory and practice of modern internal auditing as defined by the International
Professional Practices Framework (IPPF) of the Institute of Internal Auditors owes
much to Sawyer's vision.
With the implementation in the United States of the Sarbanes-Oxley Act of 2002,
the profession's exposure and value was enhanced, as many internal auditors
possessed the skills required to help companies meet the requirements of the law.
However, the focus by internal audit departments of publicly traded companies on
SOX related financial policy and procedures derailed progress made by the
profession in the late 20th century toward Larry Sawyer's vision for internal audit.
Beginning in about 2010, the IIA once again began advocating for the broader role
internal auditing should play in the corporate arena, in keeping with the IPPF's
philosophy.
MISSION
The mission of the Internal Audit is to help create the processes required for
organizational success. This is accomplished by independently and objectively
evaluating the operations and internal controls within the organization and
providing management with analyses, appraisals, and recommendations to
strengthen operations and controls
The internal audit is one of the management’s control tools who through its
operations assist the entire organization by examining and evaluating the adequacy
and efficiency of internal control, risk management, quality of operations and
governance processes. The internal audit furnishes the organization with analyses,
appraisals, recommendations ,counsel and information. The purpose is to ascertain
that the internal control system, by taking into account also the information
produced by the external auditors, functions so that the management can be
reasonably sure that the set objectives and goals will be achieved, the operations
are effective, reporting is reliable and safeguarding of assets and compliance with
the laws and regulations is done.
internal control systems and the integrity of financial and operating information
regulations.
3. To establish that there is a proper authority for every acquisition, retirement and
disposal of assets.
4. To confirm that liabilities have been incurred only for legitimate activities of the
organization.
8. To analyze and improve the system of internal check, in particular to see that it
is:-
a) working,
b) sound, and
c) economical.
10. To review the operation of the overall internal control system and to bring
economical.
PRINCIPLES OF ESTABLISHING INTERNAL AUDIT:-
1. Independence:-sufficiently high
2. Objectives:- The objectives of the internal audit function should be made very
5. Internal Audit Department:- The size and qualification of staff of the internal
audit department should be commensurate with the size of the business. The
cost of internal audit department should not exceed the benefits expected to be
aspects.
7. Follow-up and review:- There should be sufficient scope for the follow-up
action on the various points raised in internal audit report. Top management
should take active part in ensuring compliance with action points raised in the
report.
a) The head of internal audit needs to be able to ensure that work delegated
D). Evaluation of the Internal Control System:- The internal auditor should
identifyand evaluate the organization's internal control system as a basis for
reporting uponits adequacy and effectiveness.
E). Evidence:- The internal auditor should obtain sufficient, relevant and reliable
evidence on which to base reasonable conclusions and recommendations. Internal
audit evidence is information obtained by an internal auditor which enables
conclusions to be formed on which recommendations can be based. The internal
auditor should determine what evidence will be necessary by exercising judgement
in the light of the objectives of the internal audit assignment.
F). Reporting and Follow-Up:- The internal auditor should ensure that findings,
conclusions and recommendations arising from each internal audit assignment are
communicated promptly to the appropriate level of management and he should
actively seek a response
initiatives. This places the CAE in the position to report on many of the major
reporting is effective for that purpose. Internal auditors may help companies
implemented by the Board of Directors to inform, direct, manage and monitor the
organizations objectives. The internal auditor is often considered one of the "four
pillars" of corporate governance, the other pillars being the Board of Directors,
management, and the external auditor. A primary focus area of internal auditing
the Audit Committee's meeting agendas, and coordinating carefully with the
information.
AUDIT REPORT Of xyz componey
CONTENTS
Areas Covered 3
Rating Criteria
5
Detailed Observations
7
Disclaimer
17
Scope of Review
Order to Cash
HR-Payroll
Rating criteria
The observation rating criteria and risk rating criteria are as per
the pre-defined parameters specified by the company’s
management, as follows:
Define Standard Operating Procedure
QUESTIONER