IIA Standards Briefing

1. IIA Standards Briefing CUAV 2011 Williamsburg Virginia May 23, 2011

2. Your InstructorDr. Doug Ziegenfuss • Chair and Professor • Department of Accounting • Constant Hall, Room 2157 • Old Dominion University • Norfolk, Virginia 23529-0229 • Office 757-683-3514 • FAX 757-683-3258 • E-Mail dziegenf@odu.edu

3. Ground rules!(Continued) • PLEASE TURN OFF YOUR CELL PHONES AND PAGERS! • PLEASE GIVE ME YOUR HONEST EVALUATION! • I AM CONSTANTLY TRYING TO IMPROVE MY PRESENTATIONS!

4. Two Ways to Present This Material! • The first is to merely go through the standards – line by line – word by word. • Boring, Boring, Boring! • The second is to quickly summarize the framework and through case studies and exercises show how it can improve your practice! • Who chooses the first and who chooses the second?

5. The Second Approach Wins in a Landslide!

6. Issue Number 1 • Why comply with the IIA Standards? • Comments Please!

7. International Professional Practices Framework (IPPF) • Notice the Word International! • Notice it is a framework! • The IPPF comes in many forms • Free on line at: • http://www.theiia.org/guidance/standards-and-guidance/

8. International Professional Practices Framework (IPPF) The International Professional Practices Framework (IPPF) is the conceptual framework that organizes authoritative guidance promulgated by The Institute of Internal Auditors. IPPF guidance includes: Mandatory GuidanceDefinition of Internal AuditingCode of EthicsInternational Standards for the Professional Practice of Internal AuditingStrongly Recommended GuidancePosition PapersPractice AdvisoriesPractice Guides

9. New Definition of Internal Auditing • An independent, objectiveassurance and consultingactivity • 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.

10. IIA Code of Ethics • Codes of Conduct face a dilemma? • Can anyone tell me what it is? • Codes of Conduct have to be changed or they become obsolete and irrelevant. • Let’s go through the IIA Code very quickly. • Please refer to your handout. • Then we will do a couple of exercises.

11. Ethics Case-Conflict of Interest • Hawkins, an internal auditor, was performing an audit of the marketing department. • Bailey, the VP for marketing, asked him to join him for dinner at his club to discuss some elements of the audit. • Hawkins agreed.

12. Ethics Case-Professional Competence • Howard, an internal auditor, was under pressure to complete an audit on the disposal of surplus. • He had recently come upon a transaction that could have been an indication of a serious problem. • Due to the time pressure, he did not investigate the problem or record it in his workpapers.

13. Ethics Case-Morality and Dignity • Green, an internal auditor, was sent to a training seminar in another city. • Green interviews for another job and misses an afternoon session of the seminar.

14. The International Standards for the Professional Practice of Internal Auditing • Minimum Performance Standards • Attribute Standards • Performance Standards

15. Attribute Standards • 1000 – Purpose, Authority, and Responsibility • 1100 – Independence and Objectivity • 1200 – Proficiency and Due Professional Care • 1300 – Quality Assurance and Improvement Program

16. Performance Standards • 2000 – Managing the Internal Audit Activity • 2100 – Nature of Work • 2200 – Engagement Planning • 2300 – Performing the Engagement • 2400 – Communicating Results • 2500 – Monitoring Results • 2600 – Resolution of Senior Management’s Acceptance of Risks

17. Let’s Look at some issues and apply the International Standards for the Professional Practice of Internal Auditing!

18. Internal Audit Manual • How many audit shops have these? • Are they required by the standards? • Yes, see 2040. Policies and Procedures.

19. The Charter • How many folks have these? • Why have them? • What should go into them?

20. THE CHARTER • SIMILAR TO ENGAGEMENT LETTER • DOCUMENTS UNDERSTANDING BETWEEN INTERNAL AUDIT AND MANAGEMENT • MARKETING TOOL

21. THE CHARTER (CONTENTS) • PURPOSE • NATURE AND DESCRIPTION OF INTERNAL AUDITING • ORGANIZATIONAL STATUS OF INTERNAL AUDITING • REPORTING RELATIONSHIPS • SCOPE OF INTERNAL AUDITING • RESPONSIBILITIES AND AUTHORITY • FRAUD • PROHIBITED ACTS • SIGNATURES AND APPROVAL

22. Risk Assessment and Audit Scheduling • How many folks do this? • How many folks are happy with their current procedure for doing this?

23. RISK ASSESSMENT • DIVIDE ORGANIZATION INTO AUDITABLE UNITS • DETERMINE RISK FACTORS • ASSESS AUDITABLE UNITS ACCORDING TO RISK FACTORS • RANK AUDITABLE UNITS BY TOTAL RISK FACTORS • SCHEDULE AUDITS

24. Quality Assurance! • Supervision • Internal Review • External Review • TQM/Benchmarking

25. Performing the Individual Audit Assignment! • Audit Planning • Audit Fieldwork • Audit Reporting • Audit Follow-up • The standards give guidance on each of these issues.

26. Lastly! • What does it mean to say that your internal audit function, “Conforms with the International Standards for the Professional Practice of Internal Auditing?”