3/26/2021 Intro to Internal Auditing Ch.

1, 2, and 3 Flashcards | Quizlet

Intro to Internal Auditing Ch. 1, 2, and 3

Terms in this set (17)

Is an independent, objective assurance and

How does the IIA define
consulting activity designed to add value and
internal auditing?
improve an organization's operations.

Governance - the process conducted by the

board of directors to authorize, direct, and
oversee management toward the achievement of
organization's objectives.
What are the definitions of
governance, risk Risk Management - the process conducted by
management, and control management to understand and deal with
provided in this chapter? uncertainties that could affect the organization's
ability to achieve its objectives.

Control - the process conducted by management

to mitigate risks to acceptable levels.

What is the primary difference The primary difference between internal and
between internal and external external financial reporting assurance services is
financial reporting assurance the audience.
services?

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Co-sourcing means that an organization is

supplementing its in-house internal audit function
to some extent via the services of third-party
vendors. Common situations in which an
What is co-sourcing? Why
organization will co-source its internal audit
might an organization choose
function with a third-party service provider
to co-source its internal audit
include circumstances in which the third-party
function?
vendor has specialized internal audit knowledge
and skills that the organization does not have in-
house internal audit resources to fully complete
its planned engagements.

What are six components of Mandatory Guidance: Core Principles, Definition,

the IPPF? Which components International Standards, Code of Ethics
constitute mandatory
guidance? Which Strongly Recommended Guidance: Position
components constitute Papers, Practice Advisories, Practice Guides
strongly recommended
guidance?

What is the purpose of The To promote an ethical culture in the profession of

IIA's Code of Ethics? internal auditing.

Integrity, Objectivity, Confidentiality, Competency.

Internal audit services can be performed by
people who have integrity, are objective, and
Identify the four principles of
maintain confidentiality, but those services are of
the Code of Ethics. Why
little value if such persons do not have the
should internal auditors strive
necessary knowledge and skills to perform the
to comply with these
work and reach valid conclusions. That is why
principles?
there are specific standards requiring internal
auditors to be competent and continuously strive
for improvement.

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The purpose of the Standards is to delineate basic

principles that represent the practice of internal
auditing. Provide a framework for performing and
promoting a broad range of value-added internal
auditing. Establish the basis for the evaluation of
internal audit performance. Foster improved
organizational processes and operations.

What is the purpose of The Attribute Standards: Purpose, Authority, and

IIA's Standards? Explain the Responsibility, Independence and objectivity,
difference between Attribute proficiencyand due professional care, and quality
and Performance Standards. assurance and improvement program.

Performance Standards: Managing the internal

audit activity, Nature of Work, engagement
planning, performing the engagement,
communicating results, monitoring progress, and
communicating senior management's Acceptance
of Risks.

What is the definition of Independence: The freedom from conditions that

independence as it pertains threaten objectivity or the appearance of
to an internal audit function? objectivity.
What is the definition of
objectivity as it pertains to Objectivity: An unbiased mental attitude.
individual internal auditors?

Explain what is meant by the Conflicts of Interest is a situation in which an

term "conflicts of interest." internal auditor, who is in a position of trust, has a
How do conflicts of interest competing professional on personal interest.
arise?

What is the purpose of the The quality assurance and improvement program
internal audit function's must include both internal and external
quality assurance and assessments.
improvement program?

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Standards represent biased attributes and

practices that Internal Auditors must follow
What is the relationship
(mandatory).
between standards and
practice advisories?
Practice Advisors: are not mandatory to represent
best practices.

Position Papers: Provide guidance on issues that

extend beyond the specifics of how the CAE,
internal audit function, and individual internal
What are Position Papers?
auditors should conduct their work.
What are Practice Guides?

Practice Guides: Provide detailed guidance on

internal audit tools and techniques.

Stake Holders - are directly involved in the

operation of the organization's business

Interested - not directly involved but are

interested in the organization's business; that is,
What are the three different they are affected by the success or other
types of stakeholders that the outcomes of the business.
board must understand? Give
examples of each type. Influence - some stakeholders who are neither
directly involved nor interested in the success of
an organization's business, but these stakeholders
may nonetheless influence aspects of the
organization's business and, as a result, the
organization's success.

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Some of the needs and expectations are self-

evident. For example, customers expect that
products are generally free of defects and
vendors expect obligations to be paid on time.
What types of outcomes However, other expectations, such as
might a board need to shareholders' desire for dividends versus share
consider to understand price growth, may require some research and
stakeholders' expectations? analysis to fully understand. Boards may be able
to determine these expectations through internal
discussions, but they also may need to discuss
expectations directly with key stakeholders.

The extent of assurance activities performed by

the internal audit function will depend on the
What role does the internal internal audit charter, which specifies the internal
audit function play in audit function's role in governance assurance, and
governance? specific direction from the board regarding
current or ongoing expectations to perform such
activities.

The first line of defense represents the internal

control activities conducted by individuals and
management.

What are the three lines of The second line of defense represents other
defense in the Three Lines of assurance activities such as Financial Controller,
Defense model? Risk Management, Compliance, Health & Safety,
Environmental, and Quality assurance

The third line of defense represents the most

independent and objective form of assurance.

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