ACCTG 307 MODULE 2

OPERATIONS AUDIT JEZER T. GANE, CPA

I. AUTHORITATIVE GUIDANCE FOR THE INTERNAL AUDIT PROFESSION

A. THE INTERNATIONAL PROFESSIONAL PRACTICES FRAMEWORK

The International Professional Practices Framework (IPPF) is the only globally recognized guidance
for the internal audit profession and contains what are considered the essential elements for the
delivery of internal audit services.

The components of the IPPF include:

1. Mandatory Guidance 2. Recommended Guidance
 Conformance with the mandatory guidance is Recommended guidance describes practices
considered essential. This guidance is supporting effective implementation of the
developed following a rigorous due process, principles found in the mandatory guidance.
including a period of public exposure.
1. Core Principles 1. Implementation Guidance
2. Code of Ethics 2. Supplemental Guidance
3. Standards
4. Definition of Internal Auditing

B. MANDATORY GUIDANCE
The mandatory elements of the IPPF specify the essential organizational structure, relationships, and
characteristics of the work units providing internal audit services, the attributes, competencies and
behavioral norms of those delivering these services, and the essential features of the services
themselves and the processes used to perform them.

The mission of internal audit articulates what internal audit functions seek to achieve for the
organizations they serve. Namely,
“To enhance and protect organizational value by providing risk-based and objective assurance,
advice, and insight.”

 The Core Principles for the Professional Practice of Internal Auditing

The Core Principles articulate the key elements that describe internal audit effectiveness with
respect to the aspiration set forth in the mission statement. Listed below:

1. Demonstrates integrity
2. Demonstrates competence and due professional care
3. Is objective and free from undue influence (Independent)
4. Aligns with the strategies, objectives, and risks of the organization
5. Is appropriately positioned and adequately resourced
6. Demonstrates quality and continuous improvement
7. Communicates effectively
8. Provides risk-based assurance
9. Is insightful, proactive, and future-focused
10. Promotes organizational improvement.
ACCTG 307 MODULE 2
OPERATIONS AUDIT JEZER T. GANE, CPA

 The Code of Ethics

The purpose of the Code of Ethics is to promote an ethical culture in the internal audit profession.
The Code of Ethics consists of two components: the Principles of the Code and the Rules of
Conduct.

Principles of the Code - express the four ideals internal audit professionals should aspire to
maintain in conducting their work and represent the core values that internal auditors must uphold
to earn the trust of those who rely on their services.

Rules of Conduct - describe 12 behavioral norms that internal auditors should follow to put the
principles into practice.

Principles of the Code (4) Rules of Conduct (12)

1. Integrity 1.1. Internal Auditor shall perform their work with honesty, diligence, and
responsibility.
1.2 Internal Auditor shall observe the law and make disclosures expected
by the law and the profession.
1.3 Internal Auditor shall not knowingly be a party to any illegal activity
or engage in acts that are discreditable to the profession of internal
auditing or to the organization.
1.4 Internal Auditor shall respect and contribute to the legitimate and
ethical objectives of the Organization.

2. Objectivity 2.1 Internal Auditor shall not participate in any activity or relationship that
may impair or be presumed to impair their unbiased assessment. This
participation includes those activities or relationships that may conflict
with the interests of the organization.
2.2 Internal Auditor shall not accept anything that may impair or be
presumed to impair their professional judgment.
2.3 Internal Auditor shall disclose all material facts known to them that, if
not disclosed, may distort the reporting of activities under review.

3. Confidentiality 3.1 Internal Auditor shall be prudent in the use and protection of
information acquired in the course of their duties.
3.2 Internal Auditor shall not use information for any personal gain or in
any manner that would be contrary to the law or detrimental to the
legitimate and ethical objectives of the organization.

4. Competency 4.1 Shall engage only in those services for which they have the necessary
knowledge, skills, and experience.
4.2 Shall perform internal audit services in accordance with the
International Standards for the Professional Practice of Internal
Auditing.
4.3 Shall continually improve their proficiency and the effectiveness and
quality of their services.
ACCTG 307 MODULE 2
OPERATIONS AUDIT JEZER T. GANE, CPA

C. THE STANDARDS FOR THE PROFESSIONAL PRACTICE OF INTERNAL AUDITING

The Standards apply to individual internal auditors and internal audit activities. Each internal auditor
is accountable for conforming with the Standards related to individual objectivity, proficiency, and
due professional care. Each internal auditor is accountable for conforming with the Standards that
are relevant to the performance of his or her job responsibilities.

 Purpose of the Standards:

1. Guide adherence with the mandatory elements of the International Professional Practices
Framework.
2. Provide a framework for performing and promoting a broad range of value-added internal
auditing.
3. Establish the basis for the evaluation of internal audit performance.
4. Foster improved organizational processes and operations.

 There are two categories of Standards:

1. Attribute Standards - address the attributes of organizations and individuals performing
internal auditing."
2. Performance Standards - describe the nature of internal auditing and provide quality
criteria against which the performance of these services can be measured.