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Internal Auditing (Internal Audit Framework (Ethnics (Ethical guidance…
Internal Auditing
Internal Audit Framework
Ethnics
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Best Practice for internal audit to have:
- unrestricted access
- determine own priorities (set by audit committee)
- personnel with objective attitude of mind
Internal Audit Reporting
Whom should IA report to?
- Operational manager
- Chief Executive
- Finance Director
- Audit Committee
How should IA report?
- Written Report
- Aims & Scope of Audit
- Conclusions
- Recommendations
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Annual internal audit opinion delivered by chief audit executive
- provides conclusion on effectiveness of Governance
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Planning Framework
Internal Audit = Adds value & reduces risk (input-driven)
Prioritise key controls given by budget they have got
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Performance Audits
(VFM reviews) 
Efficiency
Maximising the useful output from the resources used, or minimising the level of work in producing a given level of output
Effect needed to use soap
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Economy
Acquiring resources of appropriate quality and quantity at the lowest cost
Paying soap that works
Equity
The extent to which services are available to and reach all people that they are intended to
Can everyone get soap that needs it?
Contract Audit
Common Characteristics to bring to the attention of the auditor:
- There is a legal contract
- Contract is material to the organisation's operations
- Contracts involving capital expenditure
- Contracts involving revenue expenditure of a material and ongoing nature
Stages of a contract audit:
Stage 1: Pre-tendering
Stage 2: Tendering
Stage 3: Mobilisation
Stage 4: Contract Management
Stage 5: Post-contract management
Fraud Investigations
IA to assist management:
- Always having regard to the possibility of malpractice
- Seeking to identify internal control weaknesses
- Investigating Fraud
Concerns about suspected fraud:
- identified in routine internal audit work
- a tip-off (whistleblowing)
- passed on by external audit
When investigating , IA objectives are:
- Collect sufficient evidence
- Pursue criminal proceedings
- Minimise possible losses to organisation
Likely Actions
- Tip off > consider reliability of source
- Investigate prior history of employee under suspicion
- Carry out a spot cash count if cash fraud suspected
- Be a 'mystery shopper' appearing as a customer
- Seek full extent of fraud and its financial value
- Recommend to management to suspend a suspect
- Consider whether police should be involved prior to interviewing
Interviewing in fraud cases:
- Allows a suspect to explain their actions
- Legal requirements for evidence to be admissible - PACE 1984
- Presence of a second auditor essential
- Presence of a 'friend' of suspect strongly encouraged
Concluding suspected fraud cases:
- Terminate interview and contact police
- Continue interview after cautioning suspect as required by PACE 1984