Chapter 1 Introduction to Internal Auditing Copyright: Internal
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Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A.
1
Chapter 1
Introduction to Internal
Auditing
18/1/2022
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A.
1
Chapter 1
Introduction to Internal
Auditing
18/1/2022
2
Chapter 1 Learning Objectives
Obtain a basic understanding of internal auditing and the internal
audit process.
Understand the relationship between auditing and accounting.
Distinguish between financial reporting assurance services
provided by internal auditors and those provided by independent
outside auditors.
Become familiar with the internal audit profession and The
Institute of Internal Auditors.
Understand the competencies needed to excel as an internal
auditor.
Be aware of the various internal audit career opportunities it is
possible to pursue.
18/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
Chapter 1 Learning Objectives
Obtain a basic understanding of internal auditing and the internal
audit process.
Understand the relationship between auditing and accounting.
Distinguish between financial reporting assurance services
provided by internal auditors and those provided by independent
outside auditors.
Become familiar with the internal audit profession and The
Institute of Internal Auditors.
Understand the competencies needed to excel as an internal
auditor.
Be aware of the various internal audit career opportunities it is
possible to pursue.
18/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
3
The Development of IA
Started as an extension of the external audit.
Progressed to non-financial areas as assurance. it
weakened control systems!
Became a policing job done by accountants on behalf of
management.
Developed outside accounting departments, allowing
independence and formation of own purpose.
18/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
The Development of IA
Started as an extension of the external audit.
Progressed to non-financial areas as assurance. it
weakened control systems!
Became a policing job done by accountants on behalf of
management.
Developed outside accounting departments, allowing
independence and formation of own purpose.
18/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
The Development of IA
Introduction of the “Chief Internal Auditor” job
with high organizational status.
The introduction of the “audit committee” for
the IA function to report to it as highest level.
The introduction of the professionalism.
418/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
Introduction of the “Chief Internal Auditor” job
with high organizational status.
The introduction of the “audit committee” for
the IA function to report to it as highest level.
The introduction of the professionalism.
418/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
The Development of IA Services
Internal check (double-check accounting transactions)
Transaction-based approach based on detailed continuous
program.
Statistical Sampling approach.
Probity-based (testing honesty) approach (detailed
investigations)
Spot Checks (deterrent sudden checks on any spot).
Risk analysis (restricting the previous approaches based on
risk analysis / fear).
518/1/2022
Internal check (double-check accounting transactions)
Transaction-based approach based on detailed continuous
program.
Statistical Sampling approach.
Probity-based (testing honesty) approach (detailed
investigations)
Spot Checks (deterrent sudden checks on any spot).
Risk analysis (restricting the previous approaches based on
risk analysis / fear).
518/1/2022
The Development of IA Services
System-based approach (advise management on type of control
needed). Testing the controls not for errors. Problems linked to method of
control.
Operational audit: attention to efficiency and effectiveness, value for
money and savings.
Management audit: control issues arising from managing an “activity”.
Concerned with “processes” that are needed to achieve objectives.
Understand & evaluate complex managerial systems controls.
Risk-based auditing: starts with understanding objectives, risks, design
controls based on risks, control environment and framework are
fundamental.
618/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
System-based approach (advise management on type of control
needed). Testing the controls not for errors. Problems linked to method of
control.
Operational audit: attention to efficiency and effectiveness, value for
money and savings.
Management audit: control issues arising from managing an “activity”.
Concerned with “processes” that are needed to achieve objectives.
Understand & evaluate complex managerial systems controls.
Risk-based auditing: starts with understanding objectives, risks, design
controls based on risks, control environment and framework are
fundamental.
618/1/2022
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research Foundation, 247 Maitland
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A. Slides compiled by: Prof. Esam Hussein, UAEU
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