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Internal Auditing &International Standards forthe Professional Practice of
Internal Auditing
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Internal auditing
Types of Audit: Operational auditing
Financial reportingauditing
Compliance auditing
Differences to externalauditing: Targets the main elements
in the internal controlsystem
Not obligatory Internal audiotors principal
(mandator): topmanagement
Reports to the organization(not to the generalmeeting/wide public)
Wider functions - notfocused on financialauditing
More skills needed !
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The official definition
(IIA)Internal auditing isan independent, objectiveassurance and consultingactivity designed to addvalue and improve anorganization's operations.It helps an organizationaccomplish its objectivesby bringing a systematic,disciplined approach toevaluate and improve theeffectiveness of risk
management, control, andgovernance processes.
The important elements inthe definition:
independent andobjective
assurance and consultingactivity
designed to add valueand improve anorganization's operations
a systematic, disciplined
approach to evaluate and improve
the effectiveness of risk management, control, and governance
processes.
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What are they doing in
practice ? Evaluating whether policies and procedures are being
followed.
Educating management and the board on critical issues.
Monitoring compliance with laws and regulations. Assessing operations and making best-practicerecommendations.
Providing counsel for improving controls, processes andprocedures, performance, and risk management.
Suggesting ways to reduce costs, enhance revenues,and improve profits.
Delivering in-house consulting, assurance, andfacilitation services.
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Assurance and consulting
Performed by professionals with an in-depthunderstanding of the business culture,systems, and processes, the internal auditactivity provides assurance that internalcontrols in place are adequate to mitigate therisks, and organizational goals and objectivesare met.
When there is room for improvement,
internal auditors make recommendations forenhancing processes, policies, andprocedures.
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WHY SHOULD AN ORGANIZATIONHAVE INTERNAL AUDITING?
A cornerstone of strong governance, internalauditing bridges the gap betweenmanagement and the board,
assesses the ethical climate and theeffectiveness and efficiency of operations, andserves as an organizations
safety net for compliance with rules,regulations, and overall best businesspractices. (IIA www.theiia.org)
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IA Standards and
Guidance Code of Ethics - 1968
Standards - first issued 1978
Professional Practices Framework- 2000
International Professional PracticesFramework January 2009
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.The IPPF or International Professional Practices
Framework has been developed to organise guidance for
professional internal auditing in a manner that is readily
accessible on a timely basis while strengthening theposition of The IIA as the standard setting body for the
internal audit profession globally.
The IPPF
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.
The IPPF includes only authoritative guidance developed by IIA
international technical committees following appropriate due process.
It consists of two categories:
Mandatory.
Compliance is required and the guidance is developed following the
appropriate due process, which includes public exposure. Compliance
with the principles set forth in mandatory guidance is essential for theprofessional practice of internal auditing.
Strongly Recommended.
Compliance is strongly recommended and the guidance is endorsed by
The IIA. It describes practices for the effective implementation of The
IIAs Code of Ethics and the International Standards for the Professional
Practice of Internal Auditing (Standards).
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InternationalProfessionalPractices Framework (IPPF)
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Internal Audit Definition
Internal auditing is an independent,objective assurance and consultingactivity designed to add value and
improve an organizations operations.It helps an organization accomplish itsobjectives by bringing a systematic,disciplined approach to evaluate andimprove the effectiveness of riskmanagement, control, and governanceprocesses.
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Code of Ethics
4 Principles Integrity
Objectivity
Confidentiality
Competency
12 Rules
The purpose of The Institutes Code of Ethics is to promote
an ethical culture in the profession of internal auditing. Acode of ethics is necessary and appropriate for theprofession of internal auditing, founded as it is on the trustplaced in its objective assurance about risk management,control and governance.The Institutes Code of Ethics extends beyond the definitionof internal auditing to include two essential components:
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Code of Ethics
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The International Standards
Mandatory requirements consisting of:
Statements of basic requirements for
professional practice of internalauditing
Interpretations which clarify terms orconcepts within the Statements.
Glossary
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The International Standards
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Attribute Standards1000 Purpose, Authority, and Responsibility1010 Recognition of the Definition of Internal Auditing, the Code ofEthics, and the Standards in the Internal Audit Charter
1100
Independence and Objectivity1110 Organizational Independence1111 Direct Interaction with the Board1120 Individual Objectivity1130 Impairment to Independence or Objectivity1200 Proficiency and Due Professional Care
1210 Proficiency1220 Due Professional Care1230 Continuing Professional Development1300 Quality Assurance and Improvement Program1310 Requirements of the Quality Assurance and Improvement Program1311 Internal Assessments
1312 - External Assessments1320 Reporting on the Quality Assurance and Improvement Program1321 Use of Conforms with the International Standards for theProfessional Practice of Internal Auditing1322 Disclosure of Nonconformance
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Performance Standards2000 Managing the Internal Audit Activity2010 Planning
2020 Communication and Approval2030 Resource Management2040 Policies and Procedures2050 Coordination2060 Reporting to Senior Management and the Board2070 External Service Provider and Organizational Responsibility for
Internal Auditing2100 Nature of Work2110 Governance2120 Risk Management2130 Control2200 Engagement Planning
2201 Planning Considerations2210 Engagement Objectives2220 Engagement Scope2230 Engagement Resource Allocation2240 Engagement Work Program
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2300 Performing the Engagement2310 Identifying Information
2320 Analysis and Evaluation2330 Documenting Information2340 Engagement Supervision2400 Communicating Results2410 Criteria for Communicating2420 Quality of Communications
2421 Errors and Omissions2430 Use of Conducted in Conformance with the InternationalStandards for the Professional Practice of Internal Auditing2431 Engagement Disclosure of Nonconformance2440 Disseminating Results2450 Overall Opinions
2500 Monitoring Progress2600 Communicating the Acceptance of Risks
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Non-mandatory Guidance
PracticeAdvisories
Practice Guides
Position Papers
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Thank You