S1: Foundations of Internal Auditing

Question 1

What is the mission of Internal Auditing?

Answer 1

To enhance and protect organizational value by providing risk based and objective assurance, advice, and insight.

Question 2

What is the IPPF?

Answer 2

The International Professional Practices Framework (IPPF) is the conceptual framework that organizes authoritative guidance promulgated by The IIA.

Question 3

What are the Mandatory Guidance components of IPPF?

Answer 3

1. Standards of internal audit
2. Core principles of internal audit
3. Definition if internal auditing
4. Code of Ethics

Question 4

What are the Recommended guidance components of IPPF?

Answer 4

1. Implementation guidance
2. Supplemental guidance

Question 5

What are the 3 types of risk-based and objective activities through which internal audit increases and protects value?

Answer 5

1. Assurance
2. Advice
3. Insight

Question 6

What are the 10 principles for the professional practice of internal auditing?

Answer 6

1. Demonstrates integrity
2. Demonstrates competence and due diligence
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 risked based assurance
9. Is insightful, proactive, and future focused.
10. Promotes organizational improvement.

Question 7

What is the definition of Internal Auditing?

Answer 7

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 disciplined and systematic approach to evaluate and improve the effectiveness of risk management, control, and governance (GRC) processes.

Question 8

What is independence?

Answer 8

A structure that allows for the audit activity’s freedom to determine audit or assurance scope, to perform the work judged necessary to achieve engagement objectives and to communicate results.

Question 9

What is objectivity?

Answer 9

The personal ability to be non-biased, which allows auditors to be responsive to their customers and add value through their objective analyses.

Question 10

What are the 2 main categories of standards?

Answer 10

1. Attribute Standards - address the attributes of organizations and individuals performing internal auditing
2. Performance Standards - described the nature of internal auditing and provide quality criteria against which the performance of these services can be measured.

Question 11

What are Implementation Standards?

Answer 11

They expand upon existing Attribute and Performance standards by providing the requirements specifically applicable to assurance or consulting services.

Question 12

What is Purpose, Authority and Responsibility (PAR)?

Answer 12

Covered under Standard 1000, must be clearly defined and approved by senior management and the Board.

Question 13

What is an internal audit charter?

Answer 13

Records the agreed-upon purpose, authority, scope, independence and objectivity, reporting structure, and responsibility of an organization’s internal audit activity. It establishes the audit activity within the organization; authorizes access to records, personnel, and physical properties

Question 14

What is a Chief Audit Executive (CAE)?

Answer 14

A person in a senior position responsible for effectively managing the internal audit activity.

Question 15

What is a Board?

Answer 15

The highest level governing body charged with the responsibility to direct and/or oversee the organization’s activities and hold management accountable.

Question 16

What are the elements of the Internal Audit Charter?

Answer 16

1. Introduction (purpose, mission, internal audit standards)
2. Authority - specifies full access to records and personnel to perform engagements.
3. Independence and Objectivity
4. Scope of audit activities
5. Responsibilities
6. Quality Assurance and Improvement Program
7. Approval/Signatures

Question 17

Define Assurance Services.

Answer 17

An objective examination of evidence for the purpose of providing an independent assessment on GRC processes for the organization.

Question 18

Define Consulting Services.

Answer 18

Advisory and related client services that are intended to add value and improve an organization’s GRC processes without the internal auditor assuming management responsibilities.

Question 19

Who are the 3 parties involved in assurance services?

Answer 19

1. Person directly involved with the entity
2. The internal auditor
3. User/ stakeholder

Question 20

Who are the 2 parties involved in consulting activities?

Answer 20

1. Person offering advice (internal auditor)
2. Person receiving advice (engagement client)

Question 21

What is the purpose of the Code of ethics?

Answer 21

To promote an ethical culture in internal auditing. Contains:
1. Principles that are relevant to the profession and practice of internal auditing.
2. Rules of conduct that describe behavior norms expected of internal auditors.

Question 22

What are the 4 principles of the Code of Ethics?

Answer 22

1. Integrity - establishes trust and thus provides basis for reliance on their judgment.
2. Objectivity - making a balanced assessment of all relevant circumstances and are not duly influenced by their own interests or by others in forming judgement.
3. Confidentiality - Respecting the value and ownership of information they receive and not disclosing information without appropriate authority unless there is legal or professional obligation to do so.
4. Competency - Must apply the knowledge, skills, and experience needed in the performance of internal audit services.