Core Principles

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  • #220199

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    This forum is restricted to members of the associated course(s).

    Shoaib Ahmed
    Participant

    Can you please explain this with examples that how Internal Audit:

    1) Aligns with the strategies, objectives, and risks of the organization?
    2) Is appropriately positioned and adequately resourced?

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  • #220207

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    Brian Hock
    HOCK international

    Hello, Shoaib,

    1. The IAA needs to make certain that the work that they are doing matches what the company is trying to accomplish. For example, if the company goal is to expand production and move into new markets, the IAA needs to be providing the support that is needed connected to the increased production (like helping to identify efficiencies that can be expanded, looking at the options of how it can be done, looking at waste in the production process, or bottlenecks) and also needs to be making certain that they will have the necessary skills to work in the new markets that the company is looking to expand into. f it is new countries of operations, they may need language skills, they may need different skills in the IAA if there will be a lot more international transactions and activities. But, if the company is planning on scaling back operations, then the IAA needs to be ready to provide the support that is needed connected to payroll reductions and the valuation of equipment for sales.

    2. This means that they have the proper reporting lines n the company and that they have the necessary authority to be able to dot heir work, and the needed resources (people, equipment, money) to be able to do their job.

    Brian

    #226119

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    Shoaib Ahmed
    Participant

    Can you please further elaborate the following:

    “The IAA needs to be providing the support that is needed connected to the increased production (like helping to identify efficiencies that can be expanded looking at the options of how it can be done, looking at waste in the production process, or bottlenecks).” and

    “IAA needs to be ready to provide the support that is needed connected to payroll reductions and the valuation of equipment for sales.”

     

     

    #226120

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    Shoaib Ahmed
    Participant

    How Internal Audit demonstrate achievement of the Core Principles? Can you please explain it with examples?

    #226167

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    Brian Hock
    HOCK international

    Hello, Shoaib,

    Can you please let me know where the two quoted sections that you posted are from? Are they in the textbook or in a Question? I searched, but was not able to find them.

    In terms of how to demonstrate that the IAA has achieved the core principles – this is a difficult question because it may be different for each company and how thIIA is set up and the work that they perform.

    In looking at the 10 principles:

    1) Demonstrates integrity.
    2) Demonstrates competence and due professional care.
    3) Is objective and free from undue influence (independent).
    4) Aligns with the strategies, objectives, and risks of the organization.
    5) Is appropriately positioned and adequately resourced.
    6) Demonstrates quality and continuous improvement.
    7) Communicates effectively.
    8) Provides risk-based assurance.
    9) Is insightful, proactive, and future-focused.
    10) Promotes organizational improvement.

    The way that these will be demonstrated is in how they work. They demonstrate integrity by having strong policies about objectivity and training about potential risks to that objectivity. They demonstrate due professional care with their work and reporting. They demonstrate effective communication by communicating well with other in the IAA, the board, the engagement clients…

    It is not that there is a specific list of things that they need to be able to check that they did in order to demonstrate their compliance. Rather, it is through their ongoing actions that they demonstrate compliance. They prove that they are insightful, proactive and future-focused, by making certain that they are never surprised by events that happen to the company or the industry. The demonstrate that they promote organizational improvement by making recommendations that improve the operations of the company. So, it is not a specific list of things that they need to do, but rather, an overall performance issue for the IIA.

    Does this help?

    Brian

    #226173

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    Shoaib Ahmed
    Participant

    The quotes which I mentioned above are from your example (Quote #220207). 

    #226215

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    Brian Hock
    HOCK international

    Shoaib,

    “The IAA needs to be providing the support that is needed connected to the increased production (like helping to identify efficiencies that can be expanded looking at the options of how it can be done, looking at waste in the production process, or bottlenecks).”

    The specifics are going to depend on the specifics of the company, but if the company wants to increase production, there are going to be issues and risks that they must address connected to increasing production. The IAA needs to be able to identify and help address these risks. They may be connected to needing to find new suppliers or distributers, hiring more employees, improving the efficiency of the production process, improving the logistics of movement of the raw materials, WIP and finished goods.

    “IAA needs to be ready to provide the support that is needed connected to payroll reductions and the valuation of equipment for sales.”

    Again, if they are reducing payroll, there may be risks connected to firing people and making certain it is done legally, reducing salaries for some people and making certain it is done within the structure of the current contract, making certain that the work that people who were fired were doing is picked up by others, there may be increased security risks connected to people losing salary or their job and the chance of people trying to do something to get back at the company.

    Whatever strategy the company is working to implement, there will be risks and issues that need to be addressed. The IAA needs to be able to adapt to a changing strategy and make certain that they are providing value to the company by identifying possible risks and ways to avoid, or reduce those risks.

    Brian

    #226217

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    Shoaib Ahmed
    Participant

    Thanks for your reply,

    1. Looking at your example in you mentioned that “reducing salaries for some people and making certain it is done within the structure of the current contract”. Whether Internal Audit (IA) will ensure the compliance with contract of employees? 
    2. Making certain that the work that people who were fired were doing is picked up by others (Risk is employees is picked up the competitor, so how IA can help?)
    3. there may be increased security risks connected to people losing salary or their job and the chance of people trying to do something to get back at the company (What type of security risk and how IA can help?)

     

     

    #226218

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    Shoaib Ahmed
    Participant

    Also risk connected to the following example and how IA can help:

    They may be connected to needing to find new suppliers or distributers, hiring more employees, improving the efficiency of the production process, improving the logistics of movement of the raw materials, WIP and finished goods.

    Thanks.

    #226241

    This forum is restricted to members of the associated course(s).

    Brian Hock
    HOCK international

    1. The IAA will be able to identify the elements the contract that the company needs to remain in compliance with.

    2. I mean the the work that the fired employees did not the company need to be given to someone else in the company to do. Whether they find employment with a competitor is outside of what the company can do. Though, that risk may be a risk that is identified with letting people go.

    3. They can communicate to HR and other parties involved the need to change passwords, cancel login access to the system, make certain that the fired people are not alone in the office with access to the server.

    For all of these, the specifics in a particular case will be different. I am just trying to give examples of what some of the risks for these areas may be. There are also others, and what I have listed may not be applicable in every situation.

    The IAA may be able to be used to ensure that new suppliers meet the requirements of the company. That when they hire people, proper hiring and interviewing procedures are followed. And they can test and look for inefficiencies in the production process. These are all things that are probably doing as part of the ongoing work, but if there is a significant change in the company, they may do these types of engagements prior to when normally scheduled, and they may make more emphasis on the parts of the engagement that are connected to the areas that are changing and the risks associated with those changes.

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