9.4. Evaluating the effectiveness of the internal audit service
The effectiveness of internal audit can be an important factor in assessing audit risk and CRS, and thus significantly reduce the amount of procedures that are to be performed.
The auditor prepares an internal audit evaluation program, and in his working documentation reflects the conclusions concerning the specific work of the internal auditor that has been tested, studied and evaluated. After that, the audit organization at the planning stage decides whether the internal audit work can be used for the purposes of external audit.
The content, timing and scope of the audit of a particular internal audit work depends on the external auditor's assessment of the auditor's risk, the materiality of the audit object and the preliminary evaluation of the internal audit service. Such checks may include testing of objects already checked by internal audit, checking of other objects of interest, monitoring of internal audit procedures.
The audit organization should have the right to freely and fully communicate with internal auditors.
Since the tasks of internal audit are determined by the management and (or) the owners of the economic entity, they differ from the tasks of external audit, which is obliged to give an independent assessment of the presented financial statements. At the same time, the means for solving specific tasks that are put before the external and internal auditor can coincide in a number of cases and be used in determining the content, timing and scope of external audit procedures.
If, as a result of preliminary assessment of internal audit, mutual understanding is achieved and the decision to use the work of internal auditors is made, the audit organization must find additional evidence of the effectiveness of this work.
To effectively use the work of internal audit, the audit organization should consider the work plan of the internal audit service for the period of interest and discuss it at the earliest possible stage of the audit; To determine the order of meetings with employees of the internal audit service; in advance agree on the timing of the work, the volume of the audit sample, the levels of tests, the methods for determining the sample and the procedure for documenting the work performed, which will be carried out by internal auditors.
The audit organization informs the management and (or) the owners of the economic entity and, possibly, the head of the internal audit service of any discovered factors that can be used to increase the efficiency and effectiveness of internal audit work in the future.
During the audit, the audit organization can not fully rely on the work of internal auditors. It is necessary to carry out control checks of articles and operations already checked by internal auditors. If they give similar (comparable) results, adjustments in the intended work are not required. In case of discrepancies detection, it is necessary to take adequate measures, for example to change the content or increase the volume of audit procedures.
A certain guarantee of effectiveness of internal audit can give ethical standards and professional standards of internal audit.
In principle, their observance guarantees a high quality of internal audit. The existence in the commercial organization of standards and the code of ethics of internal audit makes possible an adequate evaluation of internal audit by both the heads of the organization and by external auditors.
As a rule, the internal auditor has to discuss with the government its recommendations and proposals. In this case, there are often disagreements, which turn into intense discussions. The ability to prove the correctness of one's position depends on the professionalism and personal qualities of the internal auditor. But it should always maintain its independence and objectivity in judgments and be guided by the Code of Ethics of the Internal Auditor (or the company's internal code of conduct), as well as internal standards of internal audit.
Any ethical code should consist of general formulations describing ideal forms of behavior, i.e. such, to which professionals should strive, and from specific rules of behavior, which must be fulfilled by every professional. The code of professional ethics of internal auditors should consist of two parts - ethical principles of internal audit and the main provisions on the behavior of internal auditors (ie rules of conduct in specific situations). In our opinion, ethical principles, which are a key condition for achieving the goal of internal audit, should reflect the following main points: independence, objectivity, loyalty, responsibility, confidentiality. Let's consider these principles in more detail.
Independence helps internal auditors perform audit impartially and express objective judgments. Each internal auditor should be independent in his judgments both from his colleagues, including the chief internal auditor, and other employees of the organization, including management personnel. It should also be noted that internal auditors should not receive from the employees or customers (business partners) of the organization anything valuable (gifts, etc.) that can weaken or presumably weaken their independence with time.
The principle of objectivity follows directly from the principle of independence. Objectivity requires that internal auditors perform their work independently, skillfully and honestly. When drawing up reports on the results of inspections, the internal auditor should clearly separate facts from conjectures. The internal auditor must refuse to conduct inspections if he or she is in the family relationship with the supervised subdivision of the organization under management. The internal auditor should not put himself or be appointed by the managers in a situation in which he will not be able to give an objective conclusion.
Loyalty of internal auditors means that they should not be consciously involved in illegal or inappropriate activities, should not participate in activities or activities that could discredit the profession of the internal auditor or their organization, pour out a conflict of interest, cause damage (direct or indirect ) organization or the damage to their ability to be objective. The department (division) of internal audit should be independent, independent and neutral with respect to the levels of management at which decisions are made - this helps to prevent the possibility of its participation in the struggle for the distribution of power in the organization.
Responsibility assumes the willingness of the internal auditor to perform work only within the limits of his capabilities and professional competence, as well as his willingness to bear responsibility not only for his actions, but also for the inadequate activity of the internal audit department, even if his personal fault is absent. Internal auditors should try to constantly improve their professional level, efficiency and quality of their services.
Confidentiality means that internal auditors must be cautious in applying information acquired in the performance of their functions. They should not use confidential information for their personal or any other purposes. In addition, they should not use official relations for their own personal purposes. It should be noted that when passing all the documents related to the conduct of inspections to the person authorized to take decisions, internal auditors should not keep out of the designated places copies, rough notes, or any information on any media.
As mentioned above, the second part of the code of ethics should contain rules for the behavior of the internal auditor in specific situations. It should be vindicated that the weight of the rule should be sufficiently substantiated and clearly described to exclude the possibility of their double interpretation.
Consider the professional standards that are the beginning of internal audit, the governing rule of the activity of internal auditors, the basis for the expediency and effectiveness of the internal audit function. In our opinion, if these standards are not met, then the functioning of the internal audit department will not meet its main goal, and, therefore, makes no sense.
Following the system approach, the standards are appropriately divided into the following sections: & quot; Independence & quot ;. "Professionalism", "Implementation of internal audit". & "Internal Audit Management". In each of the sections there are subsections, which are actually standards. Consider this in more detail.
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