Internal Auditing Practices

By: Bashir A.Samad

 Chapter 1: Welcome to Auditing
 Audit is an independent and formal examin
ation of products, services, work process, d
epartments, or organization.
 Audit process steps:
 Identify
plans (what people supposed to do)
 Make observations (what people actually do
ing)
 Evaluate the facts collected (sort of evidenc
e)
 Chapter 1: Welcome to Auditing
 Audit process steps:
 Report the results (compliance or noncompli
ance)
 Follow up (ensure that problems are correct
ed)
audit principle 1
Use knowledge and skills for the advanceme
nt of public welfare
 Chapter 1: Welcome to Auditing
 Controls to examine
 An audit is a process to investigate evidence to det
ermine whether agreed upon requirements are bei
ng met,
 Its quality depends on how information is gathered
, analyzed, & reported.
 The type of audit is linked to the requirements:
 Quality audit ....quality requirements,
 Environmental audit...environmental requirements,
 Safety audit.... Safety requirements,
 Financial audit....financial statements/information
 Chapter 1: Welcome to Auditing
 Internal and External Audits
 An internal auditor serves as an independent ins
pection unit within the organization, while external
auditor represents the interests of third party stak
eholders.
 An Internal auditor examines issues related to or
ganization practices and risks, while external audi
tor examines the financial records of the organizati
on. 
 An internal audit is conducted throughout the yea
r, while external audits are needed at the end of t
he year
 Chapter 1: Welcome to Auditing
Audit Types

System Audit

Process Audit

Product
Audit
 Chapter 1: Welcome to Auditing
 System audit means to check:
 Vision,mission, objectives,
 Organizational structure,
 Policy manual,
 Standards,
 Other regulations,
 KPIs,
 Etc.
 Chapter 1: Welcome to Auditing
 Process audit means to check:
 Sequence of activities,
 inputs,
 Outputs,
 Plans
 Decision making process,
 Methods
 Etc.
 Chapter 1: Welcome to Auditing
 Product audit means to check:
 Quality of product/services,
 Attributes of product;
 size, height, width, etc.
 Appearance, color, hardness, softness, etc

.
 specifications,
 Etc.
 Chapter 1: Welcome to Auditing
 Two parties are involved in audit:
 Auditor (the person carrying out audit)
 Auditee (the organization being audited)

 These words are also sometimes used for

Auditor:
 Evaluator,
 Examiner, &
 Reviewer,
 Chapter 2: Getting the Assignment
 Step 1 of any audit is getting agreement fro
m the client…finding:
 Who, what, when, where and why?
 The first thing is to understand the assignment
 All next decisions depend on how you underst
and the assignment
 This means you are qualified to handle the tas
k.
 Chapter 2: Getting the Assignment
 Three main issues to accept the audit assig
nment:
 Are you available for the audit?
 Means, budget, permission, accessibility,
 Are you free of any conflict of interest?
 Blood relations, friendship, already involved, p
revious involved,
 Conflict of interest may affect the audit objecti

vity
Chapter 2: Getting the Assignment

Audit Principle 2
Be honest and impartial
by avoiding conflict of interest
 Chapter 2: Getting the Assignment

 Do you feel you can do a competent job?

 Have you been trained to do the work?
 Are you qualified to carry out audit?
 Do you’ve adequate experience?
 Do you understand professional code of co
nducts?

Audit Principle 3
Assigned Auditors must be competent/qualifi
ed
 Chapter 3: Audit Process Input

 Certain basic inputs are necessary befor

e you plan your journey.
 Why the audit have to be done?
 Compliance, quality, etc.
 When/where audit have to be done?
 Location (transportation), time, etc.
 What issue/area of audit?
 Department, process, product, etc.
 Chapter 3: Audit Process Input
 What standards have to be employed?
 Specific standards, ISOxxx, specific policy
manual, etc.
 Who could help me in the audit?
 Audit assistant, senior auditor, managing a
uditor, etc.

 Try to understand the purpose of the au

dit. No purpose means…no audit
 Chapter 4: Preparing for the Audit
Preparation to start audit work:
 Selecting the audit team,
 Preparing an audit plan,
 Identification of requirements,
 Preparing checklist, and
 Determining the data collection pla
ns.
 Chapter 4: Preparing for the Audit
Audit Team:
Auditors represent the audit resource
s...could be one, two, ...ten (lead auditor,
team leader, audit manager, etc.)
 Audit team are responsible for:
 Gathering evidences of the area audited
.
 Analysing data to report about complian
ce/noncompliance
 Chapter 4: Preparing for the Audit
Every audit work has a lead auditor;
responsible for:
Planning, conducting, analysin
g, & reporting

 Audit principle 4


Ensure that sufficient resources are avail

able to accomplish the purpose of the au
dit
 Chapter 4: Preparing for the Audit
Planning the audit work:
 In order to plan, auditor should communi
cate auditee about audit work.
 Some recommend to give time to audit
ee for preparation.
 Some prefer surprise audit (more for co
mpliance)
 Specify: purpose, scope, guiding standards,
team members and schedule.
 Chapter 4: Preparing for the Audit
Planning the audit work:
 Set the audit plan with schedules and de
adlines.
 It is better to notify the auditee the plann
ed internal audit with formal letter, excep
t for surprise audit.
 Surprise audit is to examine the readine
ss of the organization for external oversi
ghts
Chapter 4: Preparing for the Audit

Audit principles 5
Protect auditee property entrusted to you

Audit principles 6
Communicate agreed-upon information to
the auditee such audit times, purpose,
areas, to be audited & standards to
audited against
 Chapter 4: Preparing for the Audit
Important clause for ending the chapter:
Before you start audit work:
Prepare the list of documents, informat
ion, records and standards you need.
Wassalaam