Chapter 13-Internal Audit Key Competencies

7/28/2019 Chapter 13-Internal Audit Key Competencies

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INTERNAL AUDIT

KEY COMPETENCIES


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Important of Internal AuditKey Competencies

Fundamental things to build a set of internalauditor key competencies:

1. Academic competencies (at least a 4-year college

degree in the area followed by further educations relatedto internal audit knowledge and practice)

2. Personal competencies ( strong personal ethics,honesty, and work-related commitment)


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Internal audit key competencies are necessaryskills to conduct an effective internal audit.

Internal audit key competencies includes:1. Interviews skills

2. Analytical skills

3. Testing and analysis skills

4. Documentation skills

5. Recommending results and corrective actions

6. Communication skills

7. Negotiating skills

8. Commitments to learning


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Interviews Process

Basic steps in interview

Introduction

Explain the objectives

Ask main questions & have the answer

Check communication

Closure


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Interview Process

Interviewing is a process, a task, a set structure, anaudit standard, and an exercise in understandinghuman behavior. (Study internal auditpreliminary auditee interview checklist on

page 295) It is important to find out when, why, where, how,

what, and who regarding something.

Internal auditor should carefully plan objectives

and even expected outcomes from such sessionsand should conduct them in a planned, orderlymanner.


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The efficiency of interviews increases by theselective use of different types of questions

include:1. Open questions (Tell me about your job)

2. Closed questions (Do you work in the account dept)

3. Probing questions (tell me more about XYZ)

4. Confirmatory questions (Your job description refers toan xyz, is this correct?)

5. Clarification (I though you said that you work for Mr X?)

Avoid using the followings:1. Leading questions (Surely you check these invoices

before approving them?)2. Loaded questions (You appear to be more qualified than

your boss)

3. Trick questions (You say that you have worked here forthree and a half years; what date did you start?)


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Analytical Skills

Is the ability to visualize, articulate, and solvecomplex problems and concepts and to makedecisions that make sense based on availableinformation.

This ability is important to assure that internal auditdecisions are being made in a consistent andorganized manner.

Analytical approach is used to describe the use ofwell-documented, well-reasoned processes to arriveat internal audit decisions.


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Testing and Analysis Skills

It involves the process of establishing audit objectives, pullingsample of items of interest to ascertain if audit objectives are beingmet, and then reporting the results in a concise and comprehensive

way. Testing considerations include: The relative risks Previous audit cover The level of managerial support for the audit The audit objectives The time available for the tests Management needs

The auditors own experiences The availability of evidence The level of materiality of the item reviewed The assessment of internal control


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There are many alternatives for audit testing approachessuch as:Walkthrough tests seek to determine how the

systems objectives are achieved.Example: Take samples of customer orders for the

period and trace through the system to ensure thatthe auditor understands the system.

Compliance tests seek to determine whether controlmechanism are being applied.Example: Examine customer order order for evidence

of customer approval Substantive tests seek to determine whether control

objectives are being achieved.Example: Trace sales journal to supporting

documents such sales invoice, b/l, sales order, andcustomer order.

Dual purpose tests check for both compliance andactual error, abuse, or inefficiency.


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e erence o es o on ro nExternal &Internal Audit

External audit-TOC objective is to assess whether theamounts reported in the financial statements have beenpresented fairly in conformity with GAAP. The focus ison the reliability of financial statements.

Internal audit-TOC objective is to gather the test findingsinto control issues in a compartmentalized (classified)manner to come up with recommendations for correctiveactions. The view is not on the testing itself, but more onthe underlying control implications.


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Types of information might be found during testingprocess: Sufficient information is factual, adequate, and

convincing so that prudent, informed person would reachthe same conclusions as the auditor.

Competent information is reliable and the bestattainable through the use of appropriate engagementtechniques.

Relevant information supports engagement observationsand recommendations and is consistent with the objectivesfor the engagement

Useful information helps the organization meets its goal


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Documentation skills

Documentation is needed during the process of audit. Documentation in the audit may be subject to other

reviews or disclosures by audit committee member,external auditors, court order, or even government.

The term e-office refers to many word processing,spreadsheet, e-mail, and other forms of electronicdocumentation. (Study internal auditdocumentation best practices on page 299 and300)


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Recommending Results &Corrective Actions Describing the audit finding, making recommendation for improvement, and

presenting them in an easily understood manner are important skills for internalauditor.

When formulating the recommendations, consider the followings:1. The available option2. The need to remove barriers to good risk management and control3. The exercise of creative thinking

4. Value-for-money points5. The resource implications of recommended controls6. Any bad management practices that impair control7. The ideal solution8. The cost of poor control in terms of unmitigated risk9. Realistic (achievable)10. Start from the important first11. Designed in detail steps to support easy implementation

12. Designed to place management in a position to effect the various recommendations13. Should also be appeared in the executive summary of the report


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Communication Skills

Is important from the beginning until the endprocess of the audit.

Internal auditors should communicate with others in

the company about their work and to help othersunderstand the value of internal audit.

Documents

Chapter 13-Internal Audit Key Competencies