Leading the internal audit function

290 Pages·2016·11.87 MB·English

by  Fountain

BUSINESS, MANAGEMENT, AND ACCOUNTING F
INTERNAL AUDIT AND IT AUDIT SERIES
o
u
n
t
International Profes- a
While the Institute of Internal Auditors (IIA) has provided standards and i
sional Practice Framework (IPPF) n
guidelines for the practice of internal audit through the
, internal auditors and Chief Audit Execu-
tives (CAEs) continue to experience difficulties when attempting to balance
the requirements of the IPPF with management expectations. The true chal- L
lenge for any internal auditor is to appropriately apply the Standards while e
exerting adequate independence and objectivity in the face of management a
d
preLsesuardei.ng the Internal Audit Function
i Leading the
n
In , Lynn Fountain presents lessons
g
learned from her extensive experience as an internal auditor, internal audit

manager, and CAE to help internal auditors understand the challenges, issues, t
h
and potential alternative solutions when executing the role. The book identi- Internal Audit
e
fies more than 50 challenges for auditors and discusses potential alternative

actions the auditor can take when they experience a similar challenge. The I
n
book explains how to:
t
Function
• Build a value-oriented function that abides by the standards and e
r
supports the objectives and goals of the organization.
n
• Execute the many aspects of the internal audit, including assurance
a
and consulting work.
l
• Build a risk-based audit process.

A
• Develop and sustain the internal audit team.
• Develop and manage relationships with management and the u
audit committee. d
• Manage internal audit’s role in corporate governance, compliance, i
t
Leaadnind gfr tahued I.nternal Audit Function

F
includes real-life examples, scenarios, u
and lessons learned from internal auditors and CAEs to emphasize the impor- n
tance of carefully managing all aspects of the internal audit. The author sum- c
marizes her many lessons learned into ten “commandments” for both CAEs t
i
and internal auditors. By following the guidelines in this book, you should o
be well-equipped to gain management support, perform effective and ethical n
audits, and uphold IIA Standards.
K26126
6000 Broken Sound Parkway, NW ISBN: 978-1-4987-3042-6
Suite 300, Boca Raton, FL 33487
90000
711 Third Avenue
New York, NY 10017 CRMA, CGMA
an informa business
2 Park Square, Milton Park Lynn Fountain,
www.crcpress.com Abingdon, Oxon OX14 4RN, UK 9 781498730426
www.auerbach-publications.com AN AUERBACH BOOK

This book is one I wish were available about eight years ago when taking
my first CAE position. Lynn’s writing style, similar to her speaking style,
uses real-life examples and brings the reader into easily understanding the
concept she conveys. The reader may use the concepts in this book in any
industry, an environment, whether public or closely held; manufacturing
or service; for profit or nonprofit. I highly recommend it to new CAEs as
well as a reality check for current CAEs who wish to improve the position
of internal audit in their organizations.
Renee Wessel Jaenicke
Audit Director
CHM2M Hill
Ms. Fountain succinctly captures the challenges chief audit executives
(CAEs) face in their roles today. She provides a roadmap that will enable
those servicing in this critical role to execute their responsibilities in align-
ment to the published Institute of Internal Audit Standards and within the
company culture that they operate in on a daily basis. As a former CAE,
her lessons and wisdom provide a foundation for this outstanding book of
advice.
Tom Andreesen
Managing Director
Protiviti, Chicago
Lynn is one of the highest rated and most popular instructors on our learn-
ing platform. That would be good if the platform were limited to internal
audit content and users. What is amazing is that the platform covers the
entire office of the CFO, and here she is, leading the way for all of these
functions. Bravo Lynn and keep the great learning coming.
John Kogan
Past five-time CFO
Current Founder of Proformative Academy

Leading the
Internal Audit
Function
Internal Audit and IT Audit
Series Editor: Dan Swanson
PUBLISHED

The Chief Audit Executive: The Reality of Performing in Business Today
by Lynn Fountain
ISBN: 978-1-4987-3042-6
FORTHCOMING
Internal Audit Practice from A to Z
by Patrick Onwura Nzechukwu
ISBN: 978-1-4987-4205-4
Securing an IT Organization through Governance, Risk Management, and Audit
by Kenneth Sigler and James L. Rainey, III
ISBN: 978-1-4987-3731-9
The Complete Guide to CyberSecurity Risks and Controls
by Anne Kohnke and Daniel Shoemaker
ISBN: 978-1-4987-4054-8
Practical Techniques for Effective Risk-Based Process Auditing
by Ann Butera
ISBN: 978-1-4987-3849-1
Software Quality Assurance: Integrating Testing, Security, and Audit
by Abu Sayed Mahfuz
ISBN: 978-1-4987-3553-7
CyberSecurity: A Guide to the National Initiative for Cybersecurity Education (NICE)
Framework (2.0)
by Dan Shoemaker, Anne Kohnke, Ken Sigler
ISBN: 978-1-4987-3996-2
Leading the
Internal Audit
Function
CRMA, CGMA
Lynn Fountain,
CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 2016 by Taylor & Francis Group, LLC
CRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
Version Date: 20150512
International Standard Book Number-13: 978-1-4987-3043-3 (eBook - PDF)
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Contents
Preface xiii
IntroductIon xv
chaPter 1 Lessons of an audItor 1
Introduction 1
Management’s View 2
Section 1: Lessons Learned 4
Introduction 4
Lesson 1: Clarify/Define Management Expectations
for Internal Audit 5
Lesson 2: Balance Management Expectations
with the International Institute of Auditors Standards 6
Lesson 3: Validate the Internal Audit Charter as Fact
and Not Fiction 8
Lesson 4: Clarify the Purpose and Execution
of Risk-B  ased Auditing 9
Lesson 5: Define “Independent Risk Assessment”
in Relation to the Audit Plan 11
Lesson 6: Add Value While Maintaining Independence 11
Lesson 7: Serve the Audit Committee 13
Lesson 8: Communication of Issues When Management
Objects 15
Lesson 9: Understand How the CAE Role and Audit
Department Are Viewed 17
Lesson 10: Gaining a “Seat at the Table” 20
Section 2: Is It Legal or Is It Ethical?—The CAE’s Dilemma 23
Introduction 23
Everyone Is Responsible 25
Tone at the Top Is Essential 25
vii
viii Contents
Honesty Is Still the Best Policy 26
Integrity Can Be a Measure of Ethics 26
Corporate Responsibility and Communications Must
Be Prevalent 27
Silence Is Not Acceptable 27
Summary 29
chaPter 2 defInIng the PurPose of the InternaL
audIt functIon 31
Introduction 31
Section 1: Understanding the Definition and Purpose
of Internal Audit 32
Challenge 1: Independence and Objectivity 34
Challenge 2: Assurance and Consulting Activity 39
Challenge 3: Add Value and Improve an Organization’s
Operation 41
Challenge 4: Disciplined Approach to Evaluate
and Improve the Effectiveness of Risk Management,
Control, and Governance Processes 44
Summary: Internal Audit Definition Challenges 48
Scope of Internal Audit 49
Professional Standards—Principles for Internal Auditor
Effectiveness 50
Section 2: The Internal Charter—Reality or Fiction? 50
Introduction 50
Challenge 5: Internal Audit Charter 51
Challenge 6: Positioning and Authority 55
Section 3: Internal Audit versus Quality Assurance Functions 61
Introduction 61
Internal Audit versus Quality Assurance—The Reality 62
Mini-Audit Functions 63
Scenario: Mini-Audit Process 65
Challenge 7: Internal Audit versus Quality Assurance 66
Section 4: Management Expectations versus Standards 67
Introduction 67
Management Expectations and the Standards 67
Certified Internal Auditor 69
Challenge 8: Attribute Standards Integrity and Ethical Values 69
Challenge 9: Attribute Standards Proficiency and Due Care 72
Challenge 10: Attribute Standards Quality Assurance
and Improvement 76
Section 5: Performance Standards 77
Introduction 77
Challenge 11: Performance Standard 2000 78
Section 6: Standards and Report Writing 82
Introduction 82