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Sesi5 Internal Audit Approach
Sesi5 Internal Audit Approach
Sesi5 Internal Audit Approach
OF INTERNAL AUDIT
taufikur@ugm.ac.id
07/08/21 1
Internal Auditing Approaches
Internal auditing may be performed in many
different ways and there are a variety of
models that may be applied to exercise audit
role
The organization will define its audit needs
and this will help to establish which types of
audit service are provided
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Internal Auditing Approaches
Vouching
Focus on comparing one transaction with another to
confirm their accuracy
Principal objective is to uncover errors and possibly
identify who is responsible
Auditor is generally associated with carrying out
detailed checking of transactions that have been
processed
Internal auditor tend to follow a detailed audit program
of tests that require little understanding of the
managerial systems of control
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Internal Auditing Approaches
Verification
To test the assets and interests that are stated in
the balance sheet.
Examining evidence of the cost, authorization,
value, existence, beneficial ownership, and the
way the item is presented in the account (this
approach usually be done by external auditor,
internal auditor may also make use of this
technique particularly where assets in remote
locations have to be audited
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Internal Auditing Approaches
Problem-solving
Management requires internal auditors to
provide reports on particular managerial
problems
This is due to the great flexibility in the way
audit skills may be applied to specific
problems and the level of objectivity that is
associated with audit
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Internal Auditing Approaches
Fraud Investigations
Emphasis in an attempt to satisfy
management’s needs toward ensuring that
internal control systems are effective in
preventing most frauds and irregularities
Generally frauds arise where systems are
unsound or are not being properly operated
and the audit role is more effectively used
when it is geared towards systems reviews
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Internal Auditing Approaches
Probity Reviews
Revolve around checking the integrity of
transactions and operational activities and
tend not to involve system evaluation
This may well involve inspection based
visits to remote offices and a certain amount
of checks of compliance
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Internal Auditing Approaches
Systems Auditing
The idea is that systems are studied to assess
whether they are sufficiently controlled so that
managerial objectives may be achieved
By testing control systems and examining the
extent to which weaknesses impact on the
operation
The emphasis is not on performing an endless
series of tests but more on reviewing the system
and its principal objective
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Internal Auditing Approaches
Operational Approach
- The main purpose of internal audit is to assist (serve) from
board of directors to all management levels to achieve
organization’s goals and objectives
- This approach reflects a belief that organization's highest level
need is for strong operational effectiveness, with adequate
consideration given at the same time to protective internal
control needs
- Internal audit’s scope beyond the scope of financial audit,
internal audit is more concerned with the effectiveness of
basic operational activities and how those operational
activities contribute to the total organization welfare and
profitability
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Internal Auditing Approaches
Defining Internal Auditor Role in Organization
Internal and External Auditors: a comparison
– Mission
– Concern
– Function
– Position
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Area of Internal Audit Practice
Organizational Service Function
– Mission of internal audit
– Needs of All management levels
– Concern on Internal control system as well as success of
organization
Internal Audit’s Management Service Focus
– Helping management to do their jobs most effectively
– Maximum organization welfare
– As the eyes and ears of management
– Defines the overall operational approach of internal audit
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Area of Internal Audit Practice
Internal Audit’s Profitability Focus
– Emphasis on doing what good business for the organization
– Internal audit should understand the measure of success and
focus its activities along those lines (enhance the long-rung
profitability or success of a particular organization)
IIA Standards Approach
– Provide framework for the operational approach of internal
audit (in designing and performing an operational review)
Reliability and integrity of information
Compliance with policies, plans, procedures, laws, and
regulations
Safeguarding of assets
Economical and efficient use of resource
Accomplishment of established objectives and goals for
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operations or programs 12
Basic Operational Steps in Any Review
(Operational Approach)
An Overall Framework for Internal Audit Operation
Reviews
– Review and evaluate the background environment
– Acquire an understanding of the existing system of internal
control
– Undertake a preliminary evaluation of the adequacy of
design of the existing system
– Test compliance with the aforementioned existing systems
– Reevaluate the entire systems in terms of both current
design and actual implementation
– Summarize and report on deficiencies and present
appropriate recommendations
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