Wiley CIA Exam Review Focus Notes: Internal Audit Activity's Role in Governance, Risk and Control (Wiley Cia Exam Review. Volume 1) PDF
Preview Wiley CIA Exam Review Focus Notes: Internal Audit Activity's Role in Governance, Risk and Control (Wiley Cia Exam Review. Volume 1)
WILEY CIA EXAM REVIEW Internal Audit Activity’s Role in Governance, Risk, and Control VOLUME 1 S. Rao Vallabhaneni • Outlines • Concepts • Tools and Techniques • Standards JOHN WILEY & SONS, INC. WILEY CIA EXAM REVIEW Internal Audit Activity’s Role in Governance, Risk, and Control VOLUME 1 WILEY CIA EXAM REVIEW Internal Audit Activity’s Role in Governance, Risk, and Control VOLUME 1 S. Rao Vallabhaneni • Outlines • Concepts • Tools and Techniques • Standards JOHN WILEY & SONS, INC. This book is printed on acid-free paper. Copyright © 2009 by S. Rao Vallabhaneni. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopy- ing, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Cen ter, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions De partment, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permission. A portion of this material has been used with permission from The Institute of Internal Auditors, Inc. (IIA), 247 Maitland Avenue, Altamonte Springs, Florida 32701-4201. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in pre paring this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. 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ISBN 10: 0470277068 (Volume 1) ISBN 13: 9780470277065 ISBN: 978-0-470-27710-2 (Set) Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 Contents Preface ........................................................................................................................... vii About the Author ............................................................................................................. ix Chapter 1 Comply with the IIA’s Attribute Standards (15–25%) ........................... 1 Chapter 2 Establish a Risk-Based Plan to Determine the Priorities of the Internal Audit Activity (15–25%) ........................... 28 Chapter 3 Understand the Internal Audit Activity’s Role in Organizational Governance (10–20%) .............................................. 41 Chapter 4 Perform Other Internal Audit Roles and Responsibilities (0–10%) .... 68 Chapter 5 Governance, Risk, and Control Knowledge Elements (15–25%) ........ 72 Chapter 6 Plan Engagements (15–25%) ................................................................. 115 Appendix Sarbanes-Oxley Act of 2002 ................................................................... 131 Index ......................................................................................................................... 134 Preface The Wiley CIA Exam Review Focus Notes are developed for each of the four parts of the Certifi ed Internal Auditor (CIA) exam sponsored by the Institute of Internal Auditors (IIA). The purpose of the Focus Notes is to digest and assimilate the vast amounts of knowledge, skills, and abilities (KSAs) tested on the CIA exam in a clear, concise, easy - to - read, and - use format anywhere and any time to achieve success in the exam. Each of the Focus Notes book topics is organized in the same way as the Wiley CIA Exam Review book topics, that is, one Focus Notes book for each of the four - volume review books. This clear linkage makes the exam study time more effi cient and long - lasting, and provides the ability to recall important concepts, tools, and techniques, and the IIA Standards tested on the CIA exams. The Focus Notes are written in an outline format. However, they can be used with any study materials that you have determined works best for you to prepare for the CIA Exam. The Focus Notes provide a quick and easy refresher to the material that you are studying. The Focus Notes books will be especially useful to auditors who are traveling on an audit assignment, as well as others who are not traveling, due to their small and compact size, giving portability. The simplifi ed outlines included in this material will help you learn the essential KSAs as well as help you retain them for years to come. The Focus Notes book can also be used as a desk reference on a post - exam basis, similar to a dictionary. With no bias intended and for the sake of simplicity, the pronoun “ he ” has been used throughout the book rather than “ he/she ” or “ she. ” Good luck on the exam! S. Rao Vallabhaneni September 2008 About the Author S. Rao Vallabhaneni is an educator, author, publisher, and practitioner in the business management fi eld with more than 30 years of management and teaching experience in internal auditing, accounting, manufacturing, fi nance, and information technology consulting in the public and private sectors and the academia. The 2004 Joseph Wasserman Memorial Award recipient, he is the author of more than 50 books, including monographs, audit guides, exam study guides, and articles. He has 24 professional certifi cations in management, account- ing, auditing, fi nance, information technology, manufacturing, supply chain, quality, and human resources. He is the author of Wiley CIA Exam Review Books and CD Software. His CIA Exam Review books were trans- lated into Chinese and his CISA Exam Review book was translated into Japanese. His recent book, entitled Corporate Management, Governance, and Ethics Best Practices, was published by John Wiley & Sons, Inc. (January 2008). 1 MANAGING AN INTERNAL AUDIT FUNCTION The internal audit director needs to comply with the IIA ’ s Attribute Standards, which say that the chief audit executive (CAE) is responsible for properly managing the department so that: (1) audit work fulfi lls the general purposes and responsibilities approved by senior management and accepted by the board, (2) resources of the internal auditing (IA) department are effi ciently and effectively employed, and (3) audit work conforms to the Standards. Focus on: Comply with the IIA ’ s Attribute Standards (15 – 25%) 1 Focus on: Comply with the IIA ’ s Attribute Standards (15 – 25%) 2 1 Internal Audit Charter Basic policy statement under which the internal auditing (IA) department operates. Establishes the IA department ’ s position in the organization ’ s hierarchy. IA department operates independently of all other departments in the organization. Describes the organizational status that the director of internal auditing should report to the chief executive offi cer (CEO) but have access to the board of directors. A dual reporting relationship exists here: reporting administratively to the president or CEO, and reporting functionally to the audit committee of the board of directors. Describes the purpose, authority, and responsibility of the IA department. • • • • •
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