Ryan Schnobrich CPA CIA Slides available on https insidesoueduiaindexhtml Definition of Internal Auditing Internal auditing is an independent objective assurance and consulting activity designed to add value and improve an organizations operations ID: 904726
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Slide1
Slide2SOU Internal AuditingBy
Ryan Schnobrich,
CPA
, CIA
Slides available on
https://
inside.sou.edu/ia/index.html
Slide3Definition of Internal Auditing
“Internal
auditing is an independent, objective
assurance
and consulting activity designed to add value and improve an organization's operations.
It
helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes
.”
– The Institute of Internal Auditors (IIA)
Slide4Types of Auditors
.
External Auditors
Accounting Firms
Financial audits – concerned about material accuracy (@$50,000 at SOU)
Compliance audits – A-133 for Financial Aid
Technical assessments – network security
Government Agencies
Regulatory compliancePerformance audits
Internal Auditors
Annual risk-based
audit
plan
Process audits - identify
, assess and evaluate areas of significant risk
Annual
Assessment of Management
Responsibilities
Assessment
of Management’s Control of Fraud
Risk
Follow-up engagements
Consulting services
Investigative services
Slide5The Three Lines of Defense
The first line of defense is operational management who owns the risks and controls to mitigate those risks.
The
second line of defense is the risk management and compliance functions which establish and monitor controls.
The
third line of defense is internal audit who independently and objectively provides assurance on the effectiveness of governance, risk management and internal control including the manner in which the first and second lines of defense achieve their risk management and control objectives.
Slide6What is Assurance?
Absolute
a
ssurance does not exist.
There are inherent limitations in systems:
Use of judgment in establishing estimates;
Human error;Interpretations of accounting and other standards;Degree of uncertainty, complexity, subjectivity, bias, possible concealment or fraud, etc.;There is audit risk:Use of sampling;Persuasive evidence instead of conclusive evidence;Limitations on access, scope, cost-benefit, etc.;
Reasonable assuranceAffirmatively
, but not absolutely, proves that things are as they should be.Limited assuranceMeans nothing has come to my attention that would cause me to believe that things are not as they should be.
Slide7Standards
The Institute of Internal Auditors International Professional Practices Framework (the
Standards
) updated 2017:
https
://
na.theiia.org/standards-guidance/mandatory-guidance/Pages/Standards.aspxIndependently identify and assess significant risks and their internal control processes. Provide independent and objective assurance to the Board of Trustees and assist the President via consulting and investigative services per Internal Audit’s Charter and Annual Internal Audit Plan.
Integrate with executive management and coordinate alignment with enterprise risk management. Integrate with the General Counsel and coordinate alignment with legal standards.Integrate with the Board Secretary and coordinate alignment with governance standards.
Internal Audit is part of the governance function, but it is not a part of the management or compliance functions. Therefore, Internal Audit does not make management decisions, direct employees, nor ensure that objectives are met.
Slide8Standards-Based Audit Process
CONTINUOUS COMMUNICATION
Slide9Purpose
It is the purpose of Internal Audit to support the Executive and Audit Committee of the Southern Oregon University Board of Trustees and the University President by providing independent, objective assurance and consulting services designed to add value, support accountability and improve University operations.
Slide10Mission
It is the mission of Internal Audit to assist University leadership in accomplishing its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of Southern Oregon University’s risk management, internal control and governance processes. Audits will be conducted with objectivity, transparency, fairness and in accordance with the highest professional and ethical standards.
Slide11Role
It is required by professional standards that Internal Audit be totally independent and objective. Therefore, Internal Audit is functionally accountable to the Executive and Audit Committee of the Board of Trustees, but reports administratively directly to the President.
Board of Trustees
Executive & Audit Committee
President
Internal Auditor
General Counsel
Board Secretary
Slide12Objectives
It is the objective of Internal Audit to determine whether the University’s network of governance, risk management and control processes, as designed and represented by management, is adequate and functioning in a manner to confirm that:
Risks are appropriately identified and managed; specifically including management compliance with laws and regulations.
Governance interaction occurs as needed.
Significant financial, managerial, and operating information is accurate, reliable and timely.
Employee’s actions are in compliance with policies, standards, procedures, professional ethics and applicable laws and regulations; specifically including privacy and security.
Resources are acquired economically, used efficiently and adequately protected; specifically including review of management processes and internal controls and the prevention and detection of fraud.Accountability systems are in place to ensure organizational and program missions, goals, plans, and objectives are achieved.
Quality and continuous improvement are fostered in the University’s control process.Significant legislative or regulatory issues impacting the University are recognized and properly addressed.Opportunities for improving managements’ governance, risk management control processes, effectiveness and the University’s image may be identified during internal audits. They will be communicated to the appropriate level of management. Significant opportunities and feedback will be summarized and reported to the Executive and Audit Committee of the Board of Trustees.
Slide13Responsibilities
Develop an annual internal audit plan using an appropriate risk-based methodology and including the consideration of any risks or control concerns identified by management and submit the plan along with a financial budget, human resource plan and any resource limitations or significant interim changes to the President and Executive and Audit Committee of the Board of Trustees for review and approval.
Implement the annual internal audit plan and report results to the President and Executive and Audit Committee of the Board of Trustees.
Periodically provide information to the President and Executive and Audit Committee of the Board of Trustees on the status and results of the annual internal audit plan, the sufficiency of Internal Audit resources relative to its Objectives and Responsibilities, and emerging trends and successful practices in internal auditing.
Provide reports to the Board of Trustees Executive and Audit Committee and President on the implementation status of prior audit recommendations.
Provide advisory and consulting services, beyond internal audit assurance services, to assist management in meeting their objectives, including participating in the development or modification of major information systems, significant changes in functions, services, processes, operations, control processes or strategies.
Provide an annual assessment on the adequacy and effectiveness of the University’s processes for controlling its activities, managing its risks, governance, and the performance of management responsibilities in the areas set forth in Internal Audit’s Objectives.
Report significant issues related to the processes for controlling the activities of the University and its applicable affiliates, including potential improvements to those processes, and provide information concerning such issues through resolution.
Assist in the investigation of allegations of fraud or fraudulent actions in accordance with Southern Oregon University fraud policy.Maintain a professional internal audit function with sufficient knowledge, skills, experience, and professional certifications to meet the requirements of this Charter.Report the results of internal and external assessments conducted in association with the Quality Assurance and Improvement Program.Confirm annually the organizational independence of Internal Audit.
Slide14Authorized by the Board to:
Have unrestricted access to all functions, records, information, property, and personnel of Southern Oregon University. Information will be handled in a confidential, secure and prudent manner as required by the Code of Ethics.
Audit any function, program, account or system deemed necessary and appropriate in its sole judgement, notwithstanding a pre-approved internal audit plan.
Have full and free access to the Executive and Audit Committee of the Board of Trustees in whole or in part in conjunction with open meeting laws.
Allocate resources, set frequencies, select subjects, determine scopes of work, and apply the techniques required to accomplish internal audit objectives in accordance with professional standards.
Obtain the necessary assistance of personnel, as well as other specialized services from within or outside the organization.
Finalize internal audit reports and provide such reports to relevant parties.
Slide15Not Authorized by the Board to:
Perform, direct or manage any operational duties for the University external to Internal Audit. Accordingly, Internal Audit will not design, implement, or approve internal controls, develop procedures, install systems, prepare records, or engage in any other activity that may impair, or give the perception of impairing, Internal Audit’s judgment, independence or objectivity.
Direct the activities of any University employee not employed by Internal Audit, except to the extent such employees have been appropriately assigned to an internal audit team or to otherwise assist the internal auditor(s). Accordingly, although constantly seeking the input and opinions of others, Internal Audit takes direction solely from the Executive and Audit Committee.
Initiate or approve accounting transactions external to Internal Audit.
Perform internal audits of any area or activity where they have worked or for which they have been principally responsible for at least two years after they leave the position.
Slide16Board Expectations:
All University employees are expected to comply fully and timely with requests made by Internal Audit and not interfere, impede or affect Internal Audit’s necessary independence and objective mental attitude. This includes, but is not limited to, timely provision of information, access to information, or responses to draft reports.
Recommendations
made by Internal Audit shall be taken seriously and steps shall be taken to assess and comply with said recommendations.
Internal
Audit may report any non-compliance on the part of University programs or employees to the President and/or the Executive and Audit Committee of the Board of Trustees.
Slide17IIA Code of Ethics
Integrity - The integrity of Internal Auditors establishes trust and thus provides the basis for reliance on their judgment.
Objectivity - Internal Auditors exhibit the highest level of professional objectivity in gathering, evaluating, and communicating information about the activity or process being examined. Internal Auditors make a balanced assessment of all the relevant circumstances and are not unduly influenced by their own interests or by others in forming judgments.
Confidentiality - Internal Auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so.
Competency - Internal Auditors apply the knowledge, skills, and experience needed in the performance of internal auditing services.
Slide18IIA Rules of Conduct
1. Integrity - Internal Auditors:
1.1. Shall perform their work with honesty, diligence, and responsibility.
1.2. Shall observe the law and make disclosures expected by the law and the profession.
1.3. Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organization.
1.4. Shall respect and contribute to the legitimate and ethical objectives of the organization.
2. Objectivity - Internal Auditors:2.1. Shall not participate in any activity or relationship that may impair or be presumed to impair their unbiased assessment. This participation includes those activities or relationships that may be in conflict with the interests of the organization.
2.2 Shall not accept anything that may impair or be presumed to impair their professional judgment.2.3 Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.
3. Confidentiality - Internal Auditors:3.1 Shall be prudent in the use and protection of information acquired in the course of their duties.3.2 Shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organization.4. Competency - Internal Auditors:4.1. Shall engage only in those services for which they have the necessary knowledge, skills, and experience.4.2 Shall perform internal auditing services in accordance with the International Standards for the Professional Practice of Internal Auditing.4.3 Shall continually improve their proficiency and the effectiveness and quality of their services.
Slide19IIA Core Principles
Demonstrates
integrity.
Demonstrates
competence and due professional
care.
Is objective and free from undue influence (independent).Aligns with the strategies, objectives, and risks of the organization.
Is appropriately positioned and adequately resourced.Demonstrates quality and continuous
improvement.Communicates effectively.Provides risk-based assurance.Is insightful, proactive, and future-focused.Promotes organizational improvement.
Slide20Questions?Ryan Schnobrich, CPA, CIA
Internal Auditor
schnobrir@sou.edu
541-552-8297
Please complete a Quality
Assurance & Improvement Program Survey
:
https://sou.co1.qualtrics.com/jfe/form/SV_1BOLaW3VkRld0fb
Fraud Hotline by EthicsPoint:1-855-375-6776sou.ethicspoint.com