Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland

Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA. 1
Managing the Internal
Audit Function
CHAPTER 9
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Chapter 9 Managing the Internal Audit
Function Learning Objectives
Identify the benefits of various organizational structures for
an internal audit function.
Identify the roles and responsibilities of the key positions in
an internal audit function.
Understand the policies and procedures of internal auditing
and how they guide the internal audit function.
Understand various risk management models and reflect
on what role the internal audit function should have in the
organizations risk management processes.
Understand quality assurance, how it operates, and why it
is important to the internal audit function.
Understand how technology is used in the management of
the internal audit function.
2
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Position of Internal Audit Function
Within the Organization
Managing the internal audit function
Able to fulfill the requirements of the
charter
Efficiently and effectively employ
resources
Conform to the Standards
Being an intricate part of audit
committee process requires status
within the organization
Part of organizations communication
process
Invited to proper level meetings
Considered a peer within the
management ranks

3
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Audit Committee Charter versus
Internal Audit Charter
Internal Audit Charter
Audit Committee and CAE
Audit Committee Charter
4
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Internal Audit Charter
Key to the start of internal audit process
Charter
Internal audits position within the
organization
Proper access to records, people and
properties
Defines scope of department
Must be in writing
Purpose, authority and responsibility must be
clear
CAE must continually assess the charter

5
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Exhibit 9-2

6
Internal Auditing: Assurance and Consulting Services, 2
nd
Edition. 2009 by The
Institute of Internal Auditors Research Foundation,
247 Maitland Avenue, Altamonte Springs, FL 32701 USA
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Organizational Independence
Standard 1110.A1
Key Points
Support of board and management
Reporting structure of department
Reporting schedule and process for CAE
At a minimum the CAE should report to
the CEO




7
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Auditor Independence
Maintain independence in performing audits
Staff must understand with independence
comes responsibilities for professionalism
and high degree of expertise in their work
Peer review within department enhances
the work product
High ethical standards is needed
Independence must be maintained in fact
and appearance
8
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Audit Scope Limitations
Restriction placed upon an audit that
precludes auditor from accomplishing
his/her task
Access to records, personnel, properties
Interference with audit schedule
Limited audit procedures
Staffing plans and budget approvals
When there are limitations the CAE must
inform the audit committee
Exhibit 9-3
9
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Exhibit 9-3
10
Internal Auditing: Assurance and Consulting Services, 2
nd
Edition. 2009 by The
Institute of Internal Auditors Research Foundation,
247 Maitland Avenue, Altamonte Springs, FL 32701 USA
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Proficiency and Due Care
Standard 1200/1210
Possess required knowledge, skills
and other competencies to complete
the task
Communication skills a key part of
requirements
Verbal
Written



11
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Audit Planning Process
Risk based
Prioritization
Budget
Collaboration
Top-down approach
Bottom-up prioritization
Consulting services
Coordinate with
External Auditors
12
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
A Department Organization
CAE
Financial Auditors Information Technology Operational
Staff Staff Staff
13
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Key Elements in Planning
Proper goals and objectives
Work schedules
Staffing and budgets
Activity reports
Communication of plan to board and
management
Details in planning
Dates and results of last audits
Updated risk assessments
Special requests by the board and management
Changes in management, systems and processes
Potential for operating improvements and cost saving



14
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Managing the Department
Resources
Staffing the department
Department organization structure
Hiring practices
Training and mentoring
Career planning and professional development
Strategic Sourcing
Scheduling
Size of department and budgeting (taking one
for the team)

15
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Coordination with External
Auditors
Audit coverage
Access to each others audit programs
and work papers
Exchange of Audit Reports and
Management Letters
Common understanding of audit
techniques, methods and terminology
16
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Reporting to Board and Senior
Management
Standard 2060
Risks and Controls
External auditor
coordination
Annual Report with
quarterly updates
Report on audit
responses by
management
Executive sessions
Audit Comm.
CAE Management Others
17
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Internal Audit and Risk
Management
Risk mitigation versus risk
management
Risk management must involve senior
management and is a key
responsibility
Standard 2110 internal audit should
assist the organization by identifying
and evaluating exposures to risk
Consulting versus assurance activities

18
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Risk Management Objectives
Identification and prioritization
Level of acceptable risk
Design and implementation of risk mitigation
activities
Monitoring activities
Reporting process
Formal
Part of Audit Committee Process
Audit role
CAE reporting
Standard 2600
19
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Audit of Controls
Any break in the circle
is a problem
Standard 2600 (Risk
Mgmt.)
Standard 2120
(Control)
Standard 2130
(Governance)
Assurance Activities
Consulting Activities

Control
Governance
Risk Mgmt
20
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Ethics Within the Organization
Formal Code of Conduct
Communication of good and bad
Accessible ways to report violations
Clear delegation of responsibilities
Personnel practices
Reference and background checks
Regular audits
21
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Quality Assurance
Evaluation of the internal audit
department
Standards 1300,1311 and 1312
Implementing quality programs
Small departments
Material deficiencies (Standard 1340)

22
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Exhibit 9-5
23
Internal Auditing: Assurance and Consulting Services, 2
nd
Edition. 2009 by The
Institute of Internal Auditors Research Foundation,
247 Maitland Avenue, Altamonte Springs, FL 32701 USA
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Using Technology to Assist in
Managing Internal Audit
Control self assessment teams
Risk assessments
Data interrogation
Monitoring tools
Automated workpapers


24
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue,
Altamonte Springs, Florida 32701-4201 U.S.A.
PowerPoint slides for this text were created by David Ripka, CIA, internal audit educator at St Cloud State University, St. Cloud, MN, USA.
Summary
Organizational position of Internal Audit is of
critical importance
Audit committee charter points the way
Audit planning, scope, access to auditees
and necessary documentation to complete
audit is dependent on department stature
and independence
Internal audit is a critical aspect of the
governance, risk management and control
framework



25