Chapter 21 - Internal, operational, and compliance auditing. The main goals of this chapter are to: Describe the functions performed by internal auditors, describe the internal auditors' role with respect to the Sarbanes-Oxley Act, identify the standards for the professional practice of internal auditing, explain the nature and the purpose of an operational audit. Distinguish among the various types of compliance audits. | Internal, Operational, and Compliance Auditing Chapter 21 1 Major Developments Affecting the Internal Auditing Profession Need for additional assurance about financial information Demand by stock exchanges and SEC for management to assume more responsibility for financial information Need for assurance about the reliability of operational reports Demand for solutions to operational problems Passage of the Foreign Corrupt Practices Act of 1977 Report of the National Commission on Fraudulent Financial Reporting Report of the Blue Ribbon Committee on Audit Effectiveness (1998) Passage of the Sarbanes-Oxley Act of 2002 21- 2 2 2 Professional Standards of Internal Auditors—Attribute Standards Purpose, Authority, and Responsibility Independence and Objectivity Organizational independence Individual objectivity Impairments to independence and objectivity Proficiency and Due Professional Care Proficiency Due professional care Continuing Professional development Quality Assurance and . | Internal, Operational, and Compliance Auditing Chapter 21 1 Major Developments Affecting the Internal Auditing Profession Need for additional assurance about financial information Demand by stock exchanges and SEC for management to assume more responsibility for financial information Need for assurance about the reliability of operational reports Demand for solutions to operational problems Passage of the Foreign Corrupt Practices Act of 1977 Report of the National Commission on Fraudulent Financial Reporting Report of the Blue Ribbon Committee on Audit Effectiveness (1998) Passage of the Sarbanes-Oxley Act of 2002 21- 2 2 2 Professional Standards of Internal Auditors—Attribute Standards Purpose, Authority, and Responsibility Independence and Objectivity Organizational independence Individual objectivity Impairments to independence and objectivity Proficiency and Due Professional Care Proficiency Due professional care Continuing Professional development Quality Assurance and Improvement Program Quality program assessments Internal assessments External assessments Reporting on the Quality Program Use of “Conducted in accordance with the Standards” Disclosure of Noncompliance 21- 3 3 3 Professional Standards of Internal Auditors—Performance Standards Manage the Internal Auditing Activity Planning Communication and approval Resource management Policies and procedures Coordination Reporting to the board and senior management Nature of Work Risk management Control Governance Engagement Planning Planning considerations Engagement objectives Engagement scope Engagement resources allocation Engagement work program 21- 4 4 4 Performing the Engagement Identifying information Analysis and evaluation Recording information Engagement supervision Communicating Results Criteria for communicating Quality of communications Errors and omissions Engagement disclosure of noncompliance with the Standards Disseminating results Monitoring Progress Management’s Acceptance of Risks Professional Standards of Internal Auditors—Performance Standards continued 21- 5 5 5 The Operational Audit Definition of Purpose Familiarization Preliminary Survey Program Development Field Work Reporting Findings Follow-up 21- 7 7 7 Attesting to Compliance with Laws and Regulations Applying Agreed-Upon Procedures to Specified Requirements Applying Agreed-Upon Procedures to the Effectiveness of Internal Controls Performing Examinations 21- 8 8 8 Auditing and Reporting on Compliance with Laws and Regulations 21- 9 9 9
