INTERNAL AUDIT ANNUAL PLANNING ENGAGEMENT PLANNING AND EXECUTION
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INTERNAL AUDIT ANNUAL PLANNING, ENGAGEMENT PLANNING AND EXECUTION Internal Audit Annual Planning, Engagement Planning and Execution 11
SESSION PLAN • Annual Audit Planning, • Engagement Execution. Internal Audit Annual Planning, Engagement Planning and Execution 22
Elaboration of Annual Plan Calculation of Total Available Resources, Allocation of Total Available Resources among appropriate engagements, Assignment of staff to the appropriate engagements, Coordination of annual plan with other assurance providers Continued review of the Actual vs Annual Plan. Internal Audit Annual Planning, Engagement Planning and Execution 33
Integration of External Resources Available Resources < Necessary Resources Integration of External Resources Internal Audit Annual Planning, Engagement Planning and Execution 44
Allocation of resources and assignment of staff Should be derived from Internal Audit Strategic Plan, Details allocated time and resources for each engagement and provides more detailed information to the user compared to Strategic Plan, Resource allocation is made based on experience and competences of the team members. Internal Audit Annual Planning, Engagement Planning and Execution 55
Coordination of annual plan with other assurance providers External Audit, External assessment of internal audit activity, Inspections undertaken by various public authorities. Internal Audit Annual Planning, Engagement Planning and Execution 66
Actual vs Annual Plan Engagement cannot be planned if not included in the annual plan, For non planned engagements, annual plan is revised, Changes made to the activity of the entity (auditee), Changes made to the assessed risks of the entity (auditee), Changes made to the resource plan, Errors/omissions identified in prior year annual plan, that should be included in the present annual plan. Internal Audit Annual Planning, Engagement Planning and Execution 77
ENGAGEMENT MANAGEMENT PHASES 1 2 3 • PLANNING • EXECUTION • REPORTING • FOLLOW UP 4 Internal Audit Annual Planning, Engagement Planning and Execution 88
Engagement Planning: Phase 1 1) Composition of audit team and kick-off meeting with the team and auditee, 2) Preliminary survey, 3) Audit objectives, 4) Audit scope, 5) Audit program. Internal Audit Annual Planning, Engagement Planning and Execution 99
Composition of audit team �Independence of auditors, �Scope and nature of activities of the auditee, �Risk grade of the auditee, �Competence of the staff, �Training needs. Internal Audit Annual Planning, Engagement Planning and 1010 Execution
Kick off meetings Kick of meeting with the team Nature, stance and timing of the work Kick off meeting with auditee Demanded information, timing of the works Internal Audit Annual Planning, Engagement Planning and 1111 Execution
Engagement Planning: Phase 1 1) Composition of audit team and kick-off meeting with the team and auditee, 2) Preliminary survey, 3) Audit objectives, 4) Audit scope, 5) Audit program. Internal Audit Annual Planning, Engagement Planning and 1212 Execution
Preliminary survey �Legal acts regulating activity of the auditee, �Charter of the auditee, �Prior period engagement files, �Job descriptions of the auditee staff, �Risk register provided by the auditee, �External audit reports, �Reports provided by other assurance providers. Internal Audit Annual Planning, Engagement Planning and 1313 Execution
Risk Reassessment Risk group Internal control risk grade Overall risk grade Internal Audit Annual Planning, Engagement Planning and 1414 Execution
Engagement Planning: Phase 1 1) Composition of audit team and kick-off meeting with the team and auditee, 2) Preliminary survey, 3) Audit objectives, 4) Audit scope, 5) Audit program. Internal Audit Annual Planning, Engagement Planning and 1515 Execution
Audit objectives �Should be derived from annual plan, �Should be based on risk assessments, �Should be based on the internal controls of the auditee, �Should be based on the risk grade of the auditee, �Should provide link to auditee’s objectives Internal Audit Annual Planning, Engagement Planning and 1616 Execution
Engagement Planning: Phase 1 1) Composition of audit team and kick-off meeting with the team and auditee, 2) Preliminary survey, 3) Audit objectives, 4) Audit scope, 5) Audit program. Internal Audit Annual Planning, Engagement Planning and 1717 Execution
Audit scope Audit team in charge should decide: � Internal controls to be tested, � Timing of tests, � Stance of the tests. Audit scope should be sufficient enough to achieve the audit objectives Internal Audit Annual Planning, Engagement Planning and 1818 Execution
Audit program The audit program defines: �Audit objectives, �Audit procedures/tests, �Audit assertions. Internal Audit Annual Planning, Engagement Planning and 1919 Execution
Audit evidence Sufficient Quantity Appropriate Quality Internal Audit Annual Planning, Engagement Planning and 2020 Execution
Audit Assertion Completeness Existence Accuracy Valuation C E A V O P & L Obligations and rights Presentation Cut off Legality Internal Audit Annual Planning, Engagement Planning and 2121 Execution
Audit techniques Verification Recalculation Observation Re-performance Inquiry Analytical procedures External confirmation Internal Audit Annual Planning, Engagement Planning and 2222 Execution
Audit tests Substantive tests Test of details Analytical tests Control tests Testing design and implementation of internal control Testing operating effectiveness of internal controls Internal Audit Annual Planning, Engagement Planning and 2323 Execution
Audit techniques Substantive tests • • • Verification Recalculation External confirmation Analytical procedures Inquiry Control tests • • Verification Observation Re-performance Inquiry Internal Audit Annual Planning, Engagement Planning and 2424 Execution
Intern control systems Detective control systems Control systems Preventive control systems Internal Audit Annual Planning, Engagement Planning and 2525 Execution
m e t s y s l e h t of ro t n Co ty i ent Audit assertio ns Audit tests Audit techniques Internal Audit Annual Planning, Engagement Planning and 2626 Execution
ENGAGEMENT MANAGEMENT PHASES 1 2 3 • PLANNING • EXECUTION • REPORTING • FOLLOW UP 4 Internal Audit Annual Planning, Engagement Planning and 2727 Execution
Engagement Execution: Phase 2 1) 2) 3) 4) 5) 6) 7) Testing design and implementation of controls, Testing operating effectiveness of controls, Substantive tests, Preparing working papers, Review of working papers, Wrap up, Closing meeting. Internal Audit Annual Planning, Engagement Planning and 2828 Execution
Testing design and implementation of control �Internal control system documentation/description of the auditee, �Walkthrough testing, �Identification of internal control design weaknesses and conclusion on effectiveness of the system Internal Audit Annual Planning, Engagement Planning and 2929 Execution
Information Flow Chart Department of cash operations of Central Bank of Armenia Mo. F (auditee) Public sector entity Contract Payment Order Approved Invoice Yes/N o Refusal Internal Audit Annual Planning, Engagement Planning and 3030 Execution
Engagement Execution: Phase 2 The second phase consists of the following steps: 1) Testing design and implementation of controls, 2) Testing operating effectiveness of controls, 3) Substantive tests, 4) Preparing working papers, 5) Review of working papers, 6) Wrap up, 7) Closing meeting. Internal Audit Annual Planning, Engagement Planning and 3131 Execution
Testing operating effectiveness of control • The nature of the tests, • The timing of the tests, • The stance. Internal Audit Annual Planning, Engagement Planning and 3232 Execution
Sampling During the organization of a sample the following points should be observed: �Type of sampling, �Sample size, �Detected errors and extrapolation of the results. Internal Audit Annual Planning, Engagement Planning and 3333 Execution
Sampling Types �Statistical samples �Random, �Systematic, �Sequential, �Monetary Unit Sampling (MUS). �Non-statistical sampling �haphazard sampling, �Snowball sampling. Internal Audit Annual Planning, Engagement Planning and 3434 Execution
Engagement Execution: Phase 2 The second phase consists of the following steps: 1) Testing design and implementation of controls, 2) Testing operating effectiveness of controls, 3) Substantive tests, 4) Preparing working papers, 5) Review of working papers, 6) Wrap up, 7) Closing meeting. Internal Audit Annual Planning, Engagement Planning and 3535 Execution
Substantive tests Test of details Analytical tests Internal Audit Annual Planning, Engagement Planning and 3636 Execution
Substantive tests - Examination of supporting documentation, - Errors and omissions are detected, - The nature and extent of tests depends on: • Risk grade of the auditee, • Results of control tests, • Fraud risk. Internal Audit Annual Planning, Engagement Planning and 3737 Execution
Engagement Execution: Phase 2 The second phase consists of the following steps: 1) Testing design and implementation of controls, 2) Testing operating effectiveness of controls, 3) Substantive tests, 4) Preparing working papers, 5) Review of working papers, 6) Wrap up, 7) Closing meeting. Internal Audit Annual Planning, Engagement Planning and 3838 Execution
Preparing audit WP (working papers) �Audit objective, �Work done, �Audit assertions, �Results of the work, including errors, omissions and weaknesses identified, audit evidence, �Auditor judgement fo achieving audit objective, �Audit objective conclusion, �Who has prepared the WP, �Date of the WP. Internal Audit Annual Planning, Engagement Planning and 3939 Execution
Engagement Execution: Phase 2 The second phase consists of the following steps: 1) Testing design and implementation of controls, 2) Testing operating effectiveness of controls, 3) Substantive tests, 4) Preparing working papers, 5) Review of working papers, 6) Wrap up, 7) Closing meeting. Internal Audit Annual Planning, Engagement Planning and 4040 Execution
Review of the WP �All the WPs should be reviewed by both team in charge and Chief Internal Auditor, �Appropriateness of reached conclusions, �Conduct of on job training and supervision. Internal Audit Annual Planning, Engagement Planning and 4141 Execution
Engagement Execution: Phase 2 The second phase consists of the following steps: 1) Testing design and implementation of controls, 2) Testing operating effectiveness of controls, 3) Substantive tests, 4) Preparing working papers, 5) Review of working papers, 6) Wrap up, 7) Closing meeting. Internal Audit Annual Planning, Engagement Planning and 4242 Execution
Exception Report Predefined format �Criteria, �Condition, �Cause, �Effect. Internal Audit Annual Planning, Engagement Planning and 4343 Execution
Wrap up and Closing Meeting • Exception report produced based on the WPs, • Closing meeting with auditee – Discussing errors, omissions and internal control weaknesses, – Exception report. Internal Audit Annual Planning, Engagement Planning and 4444 Execution
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