The Scope of internal auditing encompasses the examinations and evaluation of the adequacy and effectiveness of the organization's system of internal control and the quality of performance in carrying out assigned responsibilities. Our examinations and evaluations are composed of the following types of audits.
Internal auditors should review the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
Controls over record keeping and reporting are adequate and effective.
Internal auditors should review the systems established to ensure compliance with those policies, plans, procedures, laws, and regulations which could have a significant impact on operations and reports, and should determine whether the organization is in compliance.
Management is responsible for establishing the systems designed to ensure compliance with such requirements as policies, plans, procedures, and applicable laws and regulations. Internal auditors are responsible for determining whether the systems are adequate and effective and whether the activities audited are complying with the appropriate requirements.
Internal auditors should review the means of safeguarding assets and, as appropriate, verify the existence of such assets.
Internal auditors should review the means used to safeguard assets from various types of losses such as those resulting from theft, fire, improper or illegal activities, and exposure to elements.
Internal auditors, when verifying the existence of assets, should use appropriate audit procedures.
Internal auditors should appraise the economy and efficiency with which resources are employed.
Management is responsible for setting operating standards to measure an activity's economical and efficient use of resources. internal auditors are responsible for determining whether:
Audits related to the economical and efficient use of resources should identify such conditions as:
Internal auditors should review operations or programs to ascertain whether results are consistent with established objectives and goals and whether the operations or programs are being carried out as planned.
Management is responsible for establishing operating or program objectives and goals, developing and implementing control procedures, and accomplishing desired operating or program results. Internal auditors should ascertain whether such objectives and goals conform with those of the organization and whether they are being met.
The term "operations" refers to the recurring activities of an organization directed toward producing a product or rendering a service. Such activities may include, but are not limited to, marketing, sales, production, purchasing, human resources, finance and accounting, and governmental assistance. An operation's results may be measured against established objectives and goals which may include budgets, time or production schedules, and/or operating plans.
The term "programs" refers to special purpose activities of an organization. Such activities include but are not limited to the raising of capital, sale of a facility, fund-raising campaigns, new product or service introduction campaigns, capital expenditures, and special purpose government grants. Special purpose activities may be short-term or long-term, spanning several years. When a program is completed, it generally ceases to exist. Program results may be measured against established program objectives and goals.
Management is responsible for establishing criteria to determine if objectives and goals have been accomplished.
Internal auditors should ascertain whether criteria have been established. If so, internal auditors should use such criteria for evaluation if they are considered adequate.
If management has not established criteria, or if the established criteria, in the internal auditors' opinion, are less than adequate, internal auditors should report such conditions to the appropriate levels of management. Additionally, internal auditors may recommend appropriate courses of action depending on the circumstances.
Internal auditors may recommend alternative sources of criteria to management, such as:
If adequate criteria are not established by management, internal auditors may still formulate criteria they believe to be adequate in order to perform an audit, form an opinion, and issue a report on the accomplishment of established objectives and goals.
The internal auditors' evaluation of the accomplishment of established objectives and goals may be carried out with respect to an entire operation or program or only a portion of it. Audit objectives may include determining whether:
The objectives and goals established by management for a proposed, new, or existing operation or program are adequate and have been effectively articulated and communicated.
Internal auditors should communicate the audit results to the appropriate levels of management. The report should state the criteria established by management and employed by internal auditors and disclose the nonexistence or inadequacy of any needed criteria. If internal auditors formulated criteria by which to measure the accomplishment of objectives and goals, the report should clearly state that internal auditors formulated the criteria and then present the audit results.
Internal auditors can provide assistance to managers who are developing objectives, goals, and systems by determining whether the underlying assumptions are appropriate; whether accurate, current, and relevant information is being used; and whether suitable controls have been incorporated into the operations or programs.