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    Internal Auditing &International Standards forthe Professional Practice of

    Internal Auditing

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    Internal auditing

    Types of Audit: Operational auditing

    Financial reportingauditing

    Compliance auditing

    Differences to externalauditing: Targets the main elements

    in the internal controlsystem

    Not obligatory Internal audiotors principal

    (mandator): topmanagement

    Reports to the organization(not to the generalmeeting/wide public)

    Wider functions - notfocused on financialauditing

    More skills needed !

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    The official definition

    (IIA)Internal auditing isan independent, objectiveassurance and consultingactivity designed to addvalue and improve anorganization's operations.It helps an organizationaccomplish its objectivesby bringing a systematic,disciplined approach toevaluate and improve theeffectiveness of risk

    management, control, andgovernance processes.

    The important elements inthe definition:

    independent andobjective

    assurance and consultingactivity

    designed to add valueand improve anorganization's operations

    a systematic, disciplined

    approach to evaluate and improve

    the effectiveness of risk management, control, and governance

    processes.

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    What are they doing in

    practice ? Evaluating whether policies and procedures are being

    followed.

    Educating management and the board on critical issues.

    Monitoring compliance with laws and regulations. Assessing operations and making best-practicerecommendations.

    Providing counsel for improving controls, processes andprocedures, performance, and risk management.

    Suggesting ways to reduce costs, enhance revenues,and improve profits.

    Delivering in-house consulting, assurance, andfacilitation services.

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    Assurance and consulting

    Performed by professionals with an in-depthunderstanding of the business culture,systems, and processes, the internal auditactivity provides assurance that internalcontrols in place are adequate to mitigate therisks, and organizational goals and objectivesare met.

    When there is room for improvement,

    internal auditors make recommendations forenhancing processes, policies, andprocedures.

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    WHY SHOULD AN ORGANIZATIONHAVE INTERNAL AUDITING?

    A cornerstone of strong governance, internalauditing bridges the gap betweenmanagement and the board,

    assesses the ethical climate and theeffectiveness and efficiency of operations, andserves as an organizations

    safety net for compliance with rules,regulations, and overall best businesspractices. (IIA www.theiia.org)

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    IA Standards and

    Guidance Code of Ethics - 1968

    Standards - first issued 1978

    Professional Practices Framework- 2000

    International Professional PracticesFramework January 2009

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    .The IPPF or International Professional Practices

    Framework has been developed to organise guidance for

    professional internal auditing in a manner that is readily

    accessible on a timely basis while strengthening theposition of The IIA as the standard setting body for the

    internal audit profession globally.

    The IPPF

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    .

    The IPPF includes only authoritative guidance developed by IIA

    international technical committees following appropriate due process.

    It consists of two categories:

    Mandatory.

    Compliance is required and the guidance is developed following the

    appropriate due process, which includes public exposure. Compliance

    with the principles set forth in mandatory guidance is essential for theprofessional practice of internal auditing.

    Strongly Recommended.

    Compliance is strongly recommended and the guidance is endorsed by

    The IIA. It describes practices for the effective implementation of The

    IIAs Code of Ethics and the International Standards for the Professional

    Practice of Internal Auditing (Standards).

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    InternationalProfessionalPractices Framework (IPPF)

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    Internal Audit Definition

    Internal auditing is an independent,objective assurance and consultingactivity designed to add value and

    improve an organizations operations.It helps an organization accomplish itsobjectives by bringing a systematic,disciplined approach to evaluate andimprove the effectiveness of riskmanagement, control, and governanceprocesses.

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    Code of Ethics

    4 Principles Integrity

    Objectivity

    Confidentiality

    Competency

    12 Rules

    The purpose of The Institutes Code of Ethics is to promote

    an ethical culture in the profession of internal auditing. Acode of ethics is necessary and appropriate for theprofession of internal auditing, founded as it is on the trustplaced in its objective assurance about risk management,control and governance.The Institutes Code of Ethics extends beyond the definitionof internal auditing to include two essential components:

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    Code of Ethics

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    The International Standards

    Mandatory requirements consisting of:

    Statements of basic requirements for

    professional practice of internalauditing

    Interpretations which clarify terms orconcepts within the Statements.

    Glossary

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    The International Standards

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    Attribute Standards1000 Purpose, Authority, and Responsibility1010 Recognition of the Definition of Internal Auditing, the Code ofEthics, and the Standards in the Internal Audit Charter

    1100

    Independence and Objectivity1110 Organizational Independence1111 Direct Interaction with the Board1120 Individual Objectivity1130 Impairment to Independence or Objectivity1200 Proficiency and Due Professional Care

    1210 Proficiency1220 Due Professional Care1230 Continuing Professional Development1300 Quality Assurance and Improvement Program1310 Requirements of the Quality Assurance and Improvement Program1311 Internal Assessments

    1312 - External Assessments1320 Reporting on the Quality Assurance and Improvement Program1321 Use of Conforms with the International Standards for theProfessional Practice of Internal Auditing1322 Disclosure of Nonconformance

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    Performance Standards2000 Managing the Internal Audit Activity2010 Planning

    2020 Communication and Approval2030 Resource Management2040 Policies and Procedures2050 Coordination2060 Reporting to Senior Management and the Board2070 External Service Provider and Organizational Responsibility for

    Internal Auditing2100 Nature of Work2110 Governance2120 Risk Management2130 Control2200 Engagement Planning

    2201 Planning Considerations2210 Engagement Objectives2220 Engagement Scope2230 Engagement Resource Allocation2240 Engagement Work Program

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    2300 Performing the Engagement2310 Identifying Information

    2320 Analysis and Evaluation2330 Documenting Information2340 Engagement Supervision2400 Communicating Results2410 Criteria for Communicating2420 Quality of Communications

    2421 Errors and Omissions2430 Use of Conducted in Conformance with the InternationalStandards for the Professional Practice of Internal Auditing2431 Engagement Disclosure of Nonconformance2440 Disseminating Results2450 Overall Opinions

    2500 Monitoring Progress2600 Communicating the Acceptance of Risks

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    Non-mandatory Guidance

    PracticeAdvisories

    Practice Guides

    Position Papers

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    Thank You