Mod1 Reviewer

GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND CONTROL
Module 1. Internal Auditing

Foundations of Internal Auditing
 Internal Audit Activity: practitioners or consultants that provides independent, objective assurance and
consulting services – to add value and improvement
Mission of Internal Audit

International Standards for the Professional Practice of
Mandatory Elements of the International Professional
Internal Auditing (IISPPIA)
Practices Framework
Mission of Internal Audit: “To enhance and protect organizational value by providing risk-based and objective
assurance, advice, and insight.”
Mandatory Elements of the International Professional Practices Framework

a. Definition of internal auditing
Internal auditing: an independent, objective assurance and consulting activity designed to add value and
improve an organization’s operations.
Objectives: risk management, control, and governance processes

Assurance: assessment to provide conclusions
Consulting: advisory in nature
*International Internal Audit Standards Board (IIASB) made a revision of standards on Jan. 1, 2017, along
with the formation of International Professional Practice Framework Oversight Council (IPPFOC)
b. The Core Principles for the Professional Practice of Internal Auditing

 Articulates internal audit effectiveness
 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.
c. International Standards for the Professional Practice of Internal Auditing (the Standards)
d. [Institute’s] Code of Ethics
Code of Ethics: principles and expectations in internal auditing behavior.
*purpose: promote ethical culture in profession of internal auditing
Essential components:
1. Principles of profession and practice of internal auditing
2. Rule of conduct: behavior norms expected of internal auditors. Aid to interpret principles into
practical applications, guide ethical conduct
Integrity – trust, reliance in judgment
Objectivity – professional objectivity
Principles to uphold by internal auditors Confidentiality – respect value and ownership
of information
Competency – apply skills in the performance
Independence and Objectivity

 Independence: freedom from conditions that threaten the ability of the internal audit activity to carry out internal
audit responsibilities in an unbiased manner.
*chief audit executive has direct and unrestricted access to senior management and board
 Objectivity: unbiased mental attitude, perform engagements to believe in work product and no quality
compromise
Proficiency and Due Professional Care

 Proficiency: knowledge, skills required to carry out professional responsibilities
 Due professional care does not imply infallibility
Quality Assurance and Improvement Program

 Quality assurance and improvement program (QAIP): ongoing and periodic assessment of the entire spectrum
of audit and consulting work performed by the internal audit activity.
Internal assessments: ongoing monitoring (integral), periodic self-assessments
 Engagement planning & supervision
 Standard working process
 Working papers, sign-offs
 Interviews and reviews of stakeholders
 Benchmarking of the performance against relevant best practices
o External assessments: independent & objective evaluation (every five years by qualified independent
assessor outside)
 Two approaches: full external assessment, self-assessment
 Full external assessment: Use of qualified independent assessor
 Self-assessment: Independent external validation
Governance, Risk Management and Control

 Systematic, disciplined, and risk-based approach
 Internal audit credibility
 Governance: processes and structures to inform, direct, manage, and monitor activities towards objectives
 Risk Management: identify, assess, manage and control to provide reasonable assurance towards objectives
 Control: action taken to manage risk to achieve objectives
Fraud
 Primary responsibility of management to prevent and detect fraud
 Internal audit activity to evaluate potential occurrence
 Fraud: illegal act characterized by deceit, concealment, or violation of trust
Elements of fraud:
1. Pressure (incentive/motive) – incites actions, moving force to commit fraud
*differs from intent – particular means to commit fraud
2. Opportunity – ability to commit fraud
3. Rationalization – justification of act
LECTURE
 GMRC of the Corporation
 Removing ‘governance’ would ruin the corporation
 3 different terms:
 o
RELATED LINKS
SEC Memorandum Circular No. 19

Code of Corporate Governance for Publicly Listed Companies
A. Board’s Governance Responsibilities (1-7)
P1: Competent working board to foster long-term success and to sustain competitiveness and profitability
P2: Fiduciary roles, responsibilities and accountabilities of the Board (by law, AI, by-laws, legal
pronouncements) be known to all
P3: Establishment of Board Committees
P4: Devotion of the directors for full commitment
P5: Exercise of objective and independent judgment
P6: Assessment process, regular carry-out of evaluations
P7: Board members to apply high ethical standards
B. Disclosure and Transparency (8
P8: Disclosure policies and procedures to be practical & in accord with best practices and regulatory
expectations
P9: External auditor’s standards
P10: Material and reportable non-financial and sustainability to be disclosed
P11: Communication channel for dissemination and for informed decision-making
P12: Strong and effective internal control system and enterprise risk management framework
C. Internal Control System and Risk Management Framework
P13: Fair and equitable treatment to shareholders & their rights
D. Cultivating a Synergic Relationship with Shareholders
P14: Respect to shareholders’ rights, as well as redress in case of violation
Introduction

Mod1 Reviewer

Uploaded by

Copyright:

Available Formats

Mod1 Reviewer

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mod1 Reviewer

Uploaded by

Copyright:

Available Formats

GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND CONTROL

Module 1. Internal Auditing

Mission of Internal Audit

Mandatory Elements of the International Professional Practices Framework

Objectives: risk management, control, and governance processes

b. The Core Principles for the Professional Practice of Internal Auditing

Independence and Objectivity

Proficiency and Due Professional Care

Quality Assurance and Improvement Program

Governance, Risk Management and Control

SEC Memorandum Circular No. 19

You might also like