Chapter 2: Professional Practices Framework for Internal Auditing

This assignment provides a comprehensive overview of Chapter 2, which focuses on The Professional Practices Framework for Internal Auditing. The chapter outlines the structure and guidance provided by the framework, emphasizing the importance of ethical principles, behavioral norms, and the essential characteristics of effective internal audit activities. It explains the mission of internal auditing, the stakeholders involved, and the value proposition of internal audit services. The assignment delves into the International Professional Practices Framework (IPPF), including its mandatory and recommended guidance, the 10 Core Principles, and the Code of Ethics. It details the International Standards for the Professional Practice of Internal Auditing, including Attribute and Performance Standards, and discusses the role of assurance and consulting services. Finally, the chapter touches upon standards promulgated by other organizations relevant to internal audit functions. This detailed summary provides a solid foundation for understanding the key concepts and principles of internal auditing as presented in the chapter.

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Chapter 2
The Professional Practices
Framework: Ethics and
Standards of Practice

Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research F
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A.
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Chapter 2 Learning Object
 Understand the structure of the Professional Practices
Framework and type of guidance it provides.
 Apply the professional guidance in the practice of internal
auditing.
 Use the Professional Practices Framework to address issues
which arise in internal audit practice.
 Understand the ethical principles and behavioral norms relevant
to the profession and practice of internal auditing.
 Identify the essential characteristics of functions, organizations,
and individuals for the performance of effective internal audit
activities.
 Understand the nature of internal audit activities and the criteria
against which performance of these activities can be measured.

Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research F
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A.
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This chapter explains how authoritative guidance fr
answers questions such as:
■ What do those providing internal audit services
aspire to accomplish within an organization?
■ What should the stakeholders of internal audit
services expect from internal audit professionals?
■ What makes an internal audit function successful?
■ What does it take to be a good internal auditor?
■ What are the responsibilities of the chief audit
executive (CAE)?
■ How do the board and senior management evaluate
internal audit services?
■ In sum, how does the internal audit function add
value to the organization?

The mission of internal auditing is:
The fundamental purpose of internal audit in a
organization is “to 1- enhance and protect
organizational value by 2- providing risk-based
and objective assurance, advice, and insight.”
Stakeholders of IA:
 internal parties such as the organization’s bo
of directors (particularly the audit committee
senior management, financial and operating
managers, and
 external parties such as investors, creditors,
regulators, suppliers, and customers. 4

The International Professional Pra
Framework (IPPF) Role
 The profession’s authoritative guidance
enables internal audit professionals to
achieve its mission and deliver value-adding
services that meet the needs of this wide
array of stakeholders
Copyright: Internal Auditing: Assurance and Consulting Services, by The Institute of Internal Auditors Research F
Avenue, Altamonte Springs, Florida 32701-4201 U.S.A.
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It is globally recognized guidance for the internal
profession

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EXHIBIT 2-1: https://na.theiia.org/standards-
guidance/Pages/Standards-and-Guidance-IPPF.asp

MANDATORY GUIDANCE
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Remember: IA should:
1- increasing the organization’s value (such as
identification of improved process efficiencies)
2- protecting it (such as identifying areas where
risks are not adequately being addressed).
There are three general types of activities that
comprise the services internal audit provides:
■ Risk-based and objective assurance,
■ Risk-based and objective advice, and
■ Risk-based and objective insight.

The IA Value Proposition
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 The mandatory elements of the IPPF spec
1- The department: the essential organization
structure, relationships, and characteristics of
the work units (department) providing interna
audit services,
2- The Auditors: the attributes, competencies
and behavioral norms of those delivering thes
services, and
3- The Process: the essential features of the
services themselves and the processes used t
perform them.
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The 10 Core Principles
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They are the basis for the Code of Ethics, the Standards and guidan Demonstrates quality
and continuous
improvement. Communicates
effectively. Provides risk-based
assurance. Is insightful, proactive,
and future-focused. Promotes
organizational
improvement. Demonstrates integrity. Demonstrates
competence and due
professional care. Is objective and
independent. Aligns with the
strategies, objectives,
and risks of the
organization. Is appropriately
positioned and
adequately resourced.

The Code of Ethics
 Integrity
 Objectivity.
 Confidentiality.
 Competency
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The International Standards for the
Professional Practice of Internal Auditing
The Standards are a set of principles-focused,
mandatory requirements consisting of:
■ Statements of core requirements for the
professional practice and for evaluating the
effectiveness of performance.
■ Interpretations, clarifying terms or concepts
within the Standards
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Categories of Standards:
■ Attribute Standards “address the attributes
departments and individuals performing
internal auditing.”
■ Performance Standards “describe the natur
of internal auditing and provide quality criteri
against which the performance of these
services (assurance & consulting) can be
measured.”
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Assurance & Consulting Assurance
engagements
are performed
to provide
independent
assessments.

The Attribute Standards
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Address the characteristics that the internal audit
function and individual internal auditors must
possess to perform effective assurance and
consulting services, are divided into four main
sections:
1000 – Purpose, Authority, and Responsibility
1100 – Independence and Objectivity
1200 – Proficiency and Due Professional Care
1300 – Quality Assurance and Improvement Progr
Study the definition of each in the book Ch.2.

The Performance Standards
Describe the nature of internal audit services an
the criteria against which the performance of
these services can be assessed, are seven
sections:
2000 – Managing the Internal Audit Activity
2100 – Nature of Work
2200 – Engagement Planning
2300 – Performing the Engagement
2400 – Communicating Results
2500 – Monitoring Progress
2600 – Communicating the Acceptance of Risks
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RECOMMENDED GUIDANCE
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(Implementation Guidance and Supplemental
Guidance)
provides more specific, nonmandatory guidance. I
some cases, recommended guidance may not be
applicable to all internal audit functions. In other
cases, it may represent only one of many acceptab
alternatives.
However, this guidance is authoritative in the sens
that The IIA has endorsed it through a formal
endorsement process, which includes review for
consistency with the mandatory guidance.

STANDARDS PROMULGATED BY
OTHER ORGANIZATIONS
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Some internal audit functions need to follow other
professional guidance in addition to the IPPF. Such guidan
includes:
• U. S. Government Accountability Office’s (GAO’s).
• Standards Environmental, Health, and Safety Auditing,
• International Standards Organization (ISO).
• AA in UAE

End of Ch. 2
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