Transcript Who Audits the Auditors - The Value of Internal and

Who Audits the Auditors?
The value of Internal and External Quality
Assessments
Speaker:
www.theiia.org/Quality
Speaker Background Information
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Topics we will cover Today
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Key Areas of Discussion Today
Quality Improvement & Assurance Program
External quality assessments and why your
audit group should have one
What to expect from an external QA
How to get the most value from a QA
How an Audit
professional should
prepare for a QA
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Some areas we will NOT talk about today
All of the Standards with which you need to comply
to pass a QA
All of the components of an effective quality
program
There just isn’t enough time to
do this and the IIA and other
organizations have seminars,
books and CDs covering these
topics
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A Show of Hands
How many Internal
Audit Activities have a
QA&IP in place today?
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A Show of Hands
How many work for an
organization that has
had an external QA?
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A Show of Hands
How many work for an
organization that has not
had an external QA?
Is anyone planning to
have one?
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A Show of Hands
How many have been
part of an external QA
team?
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Does this look
familiar?
http://www.theiia.org/guidance/standards-and-practices/professional-practices-framework/
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Have you read the Quality
Standards?
Standard 1300
Quality Assurance and Improvement
Standard 1310
Quality Program Assessments
Standard 1311
Internal Assessments
Standard 1312
External Assessments
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Standard 1300: Quality
Assurance and Improvement
Program (QA&IP)
The chief audit executive must develop and
maintain a quality assurance and improvement
program that covers all aspects of the internal
audit activity and continuously monitors its
effectiveness. The program must be designed
to help the internal auditing activity add value
and improve the organization’s operations and
to provide assurance that the internal audit
activity is in conformity with the Standards and
the Code of Ethics.
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Quality Assurance and
Improvement Program
Why is a Quality Assurance &
Improvement Program necessary?
As an Organization and its Internal Audit
shops grow, its operations undergo
refinement, and its internal processes
change and evolve, its quality monitoring
process must keep pace.
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Quality and
Improvement Program
What would be the elements of a Quality
and Improvement Program?
QA
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1311: Internal Assessments
Must include:
• Ongoing reviews of the performance of the internal
audit activity; and
• Periodic reviews performed through selfassessment or by other persons within the
organization, with knowledge of internal auditing
practices and the Standards.
• Person(s) conducting assessment can be part of
internal audit activity or from another area in
the company.
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Some Elements of a QA&IP
• Staff Information (education, skills, certifications)
• Audit Plan Budget to Actual
• Audit Cycle Time
• Issues and Recommendations Tracking
• Customer Satisfaction Survey
• Staff Meeting
• Benchmarking to Best Practices
• Training
• Work Paper Review (ongoing)
• QA Review Action Plan
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Balanced Scorecard for Internal Auditing
Board/Audit Committee
• Expectations
OBJECTIVES
• Perspective on IA Roles
• Satisfaction Surveys
• List here.
MEASURES
• Perspective on IA Roles
• List here.
• Satisfaction Surveys
• Requests
• Risk Concerns
• Complaints
• CAE/AC Private Meetings
Management/Audit Customers
OBJECTIVES
• List here.
CORPORATE
STRATEGY
MEASURES
INTERNAL AUDIT
STRATEGY
• Experience
• Reporting Relationships
MEASURES
• List here.
• Importance Levels
• Improvements
• Education
• Certification
OBJECTIVES
• List here.
• List here.
• Training
Internal Audit Processes
Innovation/Capabilities
OBJECTIVES
• List here.
MEASURES
• List here
• Findings
• Repeat Findings
• Savings
• Quality Assessment
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What is the Value of Quality
to Internal Audit
ABC Organization
Executive Level
Internal
Audit
At this level Internal Audit is not
considered a valued resource to
the Organization
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What is the Value of Quality
to Internal Audit
ABC Organization
Executive Level
Internal
Audit
As the Quality of Internal Audit increases the
acceptance at the Executive Level gets Internal Audit
closer
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What is the Value of Quality
to Internal Audit
ABC Organization
Executive Level
Internal
Audit
Once Quality is achieved Internal Audit is embraced by
the Executive Level as a valuable resource within the
Organization
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Who’s Responsible for the
Quality of Internal Audit?
• Organization
• Chief Audit Executive (CAE)
Who Will Benefit?
• Internal Audit Profession
• IA Stakeholders
(AC, BOD, Regulatory Body, Sr. Mgmt)
• Internal Auditor specially CIA’s
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Professionalism &
Commitment
• The Drive to be the Best
• Success (individual & organization)
• “Persistence with a Purpose”
• Professional Development
• The Pride to be an Internal Auditor
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By the way, what’s an external
quality assessment (QA)?
Professional standards require each
internal audit function to obtain an
external quality assessment at least
once every five years (Standard 1312)
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What’s the focus of an external QA?
IIA Code of Ethics
International Standards for the Professional
Practice of Internal Auditing
Audit committee & internal audit charters
Professional certification and education
Process improvement & best practices
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What happens in an external QA?
Interview & survey stakeholders
Assess compliance with the IIA Code of Ethics
and the Standards
Assess charters, policies & procedures
Review staff experience & qualifications
Inspect workpapers
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What are the benefits of an external QA?
Expert advice & counsel from practitioners with
decades of experience and broad exposure to the
best IA functions
Sounding Board
Leverage for funding, authority, independence &
training
Visibility
Pipeline to the audit committee & senior
management
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Making a difference…
HBS or equivalent executive training
program for CAE
Staffing increases
Training and certification support
Implementation of CAATs
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Why have an external QA?
Professional credibility
Organizational credibility
Legal liability
Compliance with Standards
Continuous improvement
Audit Committee oversight
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Why are some IA functions
not in compliance?
(The IIA Common Body of Knowledge survey reports
39% of IA functions have never had an external QA)
28% of IA functions are less than 5 years old
Internal audit is not regulated
Unaware of the requirement
Unfazed by the penalty
Costs in money and time
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What problems are commonly found?
Inadequate Quality Assurance &
Improvement Program
Consulting omitted from the mission and
charter
Inadequate IT coverage or technical skills
Lack of performance measures
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What problems are commonly found?
Inappropriate CAE reporting
relationships
Out-of-date charters
Client perception of inadequate audit
staff knowledge
No formalized risk assessment process
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What Does It *Cost?
Number of
Internal
Audit Staff
Average
Size of
External QA
Team
Average
IA Staff
Preparation
(Hours)
Avg IA
Staff
Support of
QA Team
(Hrs)
1 to 2
2
200
33.5
6.6
$13,000
3 to 6
3
110
40
4.2
$15,000
7 to 15
4
100
60
5
$22,000
16 to 20
3
90
70
9.2
$35,000
21 to 30
6
135
60
9
$42,000
31 to 50
5
N/A
N/A
10.5
51 to 70
6
80
50
13
$75,000
71 to 100
3
200
120
20
$80,000
*Source: IIARF Survey April 2007
Average
Time to
Complete
QA (Days)
Average
Cost
N/A
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How long does an external QA take?
A sample timeline…
RFP 8/1 – 8/15
Prepare background info 9/1- 9/15
Stakeholder surveys 9/15 – 9/30
GAIN data input on IIA website 9/15
Preliminary meeting 10/15
On-site fieldwork 10/30 – 11/3
Issue draft report 11/15
Receive reply to draft report 11/22
Issue final report 11/29
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What is a self-assessment with
independent validation (SAIV)?
Perform your own internal
assessment and then…
Engage an independent
party to review your work
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What’s the advantage of the SAIV?
It costs less!
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What’s the trade-off for a SAIV?
Requires IAA to budget more resources
Diminished:
 Independence
 Outside perspective
 Expertise
 Board leverage
 Senior management leverage
 Oomph
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What should you do?
If you can’t get the budget for an
external QA, go the SAIV route
to get into compliance
Consider SAIV for your 1st QA
and follow-up with an external
QA in 2-3 years
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What about peer reviews?
“Even if he is lucky, the best
barber can count on no more than
the 2nd best haircut”
Issues: quality, independence,
experience, industry knowledge,
confidentiality, etc.
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How long does an SAIV take?
A sample timeline…
RFP 8/1 – 8/31
Prepare self-assessment 9/1- 9/30
Stakeholder surveys 9/15 – 9/30
GAIN data input on IIA website 9/15
Preliminary meeting 10/15
On-site validation 10/30 – 11/1
Issue draft report 11/15
Receive reply to draft report 11/22
Issue final report 11/29
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IIA Recognition Plaque
Organizations that have an
external quality
assessment completed by
The IIA with a “General
Conformance” opinion will
receive a recognition
plaque
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Where to Find Quality
Resources?
• Free Web-Based Resources by IIA Inc. and IIA
Affiliates (www.theiia.org /Quality)
• QA training seminars by IIA Inc. and IIA
Affiliates
• Local Chapters and Study Groups
• Quality Services by IIA Inc., Affiliates, and Other
Service Providers
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Time for….
Questions???
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This presentation
is from
The Institute of Internal Auditors
Global Headquarters
www.theiia.org
Contact us at [email protected]
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