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INTERNAL AUDIT KEY COMPETENCIES

BY: NADIA CITRANTI (041013080) I GAA GITA CHANDRADEWI (041013091) RR. MARTHINA BRILIANA (041013096)

Important of Internal Audit Key Competencies

Fundamental things to build a set of internal

auditor key competencies:


1.

2.

Academic competencies (at least a 4-year college degree in the area followed by further educations related to internal audit knowledge and practice) Personal competencies ( strong personal ethics, honesty, and work-related commitment)

Internal audit key competencies are necessary

skills to conduct an effective internal audit. Internal audit key competencies includes:
1. 2. 3. 4.

5.
6. 7. 8.

Interviews skills Analytical skills Testing and analysis skills Documentation skills Recommending results and corrective actions Communication skills Negotiating skills Commitments to learning

Interviews Process
Basic steps in interview
Introduction

Explain the objectives

Ask main questions & have the answer Check communication

Closure

Interview Process

Interviewing is a process, a task, a set structure, an audit standard, and an exercise in understanding human behavior. (Study internal audit preliminary auditee interview checklist on page 295) It is important to find out when, why, where, how, what, and who regarding something. Internal auditor should carefully plan objectives and even expected outcomes from such sessions and should conduct them in a planned, orderly manner.

The efficiency of interviews increases by the

selective use of different types of questions include:


1.

2.
3. 4.

5.

Open questions (Tell me about your job) Closed questions (Do you work in the account dept) Probing questions (tell me more about XYZ) Confirmatory questions (Your job description refers to an xyz, is this correct?) Clarification (I though you said that you work for Mr X?) Leading questions (Surely you check these invoices before approving them?) Loaded questions (You appear to be more qualified than your boss) Trick questions (You say that you have worked here for three and a half years; what date did you start?)

Avoid using the followings:


1.

2.
3.

Analytical Skills
Is the ability to visualize, articulate, and solve

complex problems and concepts and to make decisions that make sense based on available information. This ability is important to assure that internal audit decisions are being made in a consistent and organized manner. Analytical approach is used to describe the use of well-documented, well-reasoned processes to arrive at internal audit decisions.

Testing and Analysis Skills


It involves the process of establishing audit objectives, pulling

sample of items of interest to ascertain if audit objectives are being met, and then reporting the results in a concise and comprehensive way. Testing considerations include:

The relative risks Previous audit cover The level of managerial support for the audit The audit objectives The time available for the tests Management needs The auditors own experiences The availability of evidence The level of materiality of the item reviewed The assessment of internal control

There are many alternatives for audit testing approaches

such as: Walkthrough tests seek to determine how the systems objectives are achieved. Example: Take samples of customer orders for the period and trace through the system to ensure that the auditor understands the system. Compliance tests seek to determine whether control mechanism are being applied. Example: Examine customer order order for evidence of customer approval Substantive tests seek to determine whether control objectives are being achieved. Example: Trace sales journal to supporting documents such sales invoice, b/l, sales order, and customer order. Dual purpose tests check for both compliance and actual error, abuse, or inefficiency.

The Difference of Test of Control in External &Internal Audit


External audit-TOC objective is to assess whether the

amounts reported in the financial statements have been presented fairly in conformity with GAAP. The focus is on the reliability of financial statements. Internal audit-TOC objective is to gather the test findings into control issues in a compartmentalized (classified) manner to come up with recommendations for corrective actions. The view is not on the testing itself, but more on the underlying control implications.

Types of information might be found during testing

process:

Sufficient information is factual, adequate, and convincing so that prudent, informed person would reach the same conclusions as the auditor. Competent information is reliable and the best attainable through the use of appropriate engagement techniques. Relevant information supports engagement observations and recommendations and is consistent with the objectives for the engagement Useful information helps the organization meets its goal

Documentation skills
Documentation is needed during the process of audit. Documentation in the audit may be subject to other

reviews or disclosures by audit committee member, external auditors, court order, or even government. The term e-office refers to many word processing, spreadsheet, e-mail, and other forms of electronic documentation. (Study internal audit documentation best practices on page 299 and 300)

Recommending Results &Corrective Actions


Describing the audit finding, making recommendation for improvement, and

presenting them in an easily understood manner are important skills for internal auditor.

When formulating the recommendations, consider the followings: 1. The available option 2. The need to remove barriers to good risk management and control 3. The exercise of creative thinking 4. Value-for-money points 5. The resource implications of recommended controls 6. Any bad management practices that impair control 7. The ideal solution 8. The cost of poor control in terms of unmitigated risk 9. Realistic (achievable) 10. Start from the important first 11. Designed in detail steps to support easy implementation 12. Designed to place management in a position to effect the various recommendations 13. Should also be appeared in the executive summary of the report

Communication Skills
Is important from the beginning until the end

process of the audit. Internal auditors should communicate with others in the company about their work and to help others understand the value of internal audit.

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