Module 4 - Introduction to Performance Audit_4A

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The Definition of Internal Auditing. o 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. 9 The Mission of Internal Audit. o To enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight. 10 The Core Principles for the Professional Practice of Internal Auditing. o Demonstrates integrity. o Demonstrates competence and due professional care. o Is objective and free from undue influence (independent). o Aligns with the strategies, objectives, and risks of the organization. o Is appropriately positioned and adequately resourced. o Demonstrates quality and continuous improvement. o Communicates effectively. o Provides risk-based assurance. o Is insightful, proactive, and future-focused. o Promotes organizational improvement. 11 The Code of Ethics. 1. Integrity: The integrity of internal auditors establishes trust and thus provides the basis for reliance on their judgment. 2. 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. 3. 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. 4. Competency: Internal auditors apply the knowledge, skills, and experience needed in the performance of internal audit services. 12 The International Standards for the Professional Practice of Internal Auditing. o Attribute Standards (1000-1322). o Performance Standards (2000-2600). Care should be taken to avoid confusion regarding the Performance Standards of the IPPF which “describe the nature of internal auditing and provide quality criteria against which the performance of these services can be measured,” applicable to all types of engagements. 13 9 The International Professional Practices Framework, The IIA, 2016. 10 The International Professional Practices Framework, The IIA, 2016. 11 The International Professional Practices Framework, The IIA, 2016. 12 The International Professional Practices Framework, The IIA, 2016. 13 The International Professional Practices Framework, The IIA, 2016. 10
Non-mandatory but recommended guidance (Implementation Guidance and Supplemental Guidance) is also useful where relevant. 14 While ISSAI standards and guidance are designed for SAIs, such content is often of great value to internal auditors as well. The IIA Competency Framework is organized in four knowledge areas: Professionalism. Performance. Environment. Leadership and Communication. 15 All elements are relevant for performance auditing. Competencies taken from the performance knowledge area of particular interest for planning, performing, and reporting are included in Appendix 1. Performance Auditing Consistent with Mandate/Charter The types of audit engagements to be provided should be made clear by the legislation or charter defining the mandate of the internal or external audit provider. For example, the internal audit law of Albania includes direct reference to performance audits, as follows: Types of Internal Audit services Internal audit activity includes assurance and counselling services as follows: 1. An audit engagement in assurance services includes a thorough assessment of the governance, risk management and control processes in a public sector unit through compliance audit, performance audit, financial audit, information technology audit and other types of auditing. 2. An audit engagement in counselling services includes providing counselling and opinions aiming at adding value and improving risk management and control processes on which internal audit has no managerial responsibilities. An audit engagement in counselling services is initiated by the head of public entity. 16 For the Supreme State Control of Albania, “audit” is defined to include “compliance auditing, financial auditing, performance audit, IT audit, as well as their combined audit” and has authority to conduct performance audits in any activity considered necessary. 17 Internal and External Performance Auditing Internal auditors and external auditors have different mandates. However, both undertake performance audits. While standards may differ, they are comparable and compatible. In the absence of specific performance standards for internal auditing and detailed guidance, those designed for external auditors provide plenty of value for internal auditors. 14 For a list of IIA public sector guidance visit https://www.theiia.org/en/standards/what-arethe-standards/recommended-guidance/supplemental-guidance/. 15 The IIA’s Internal Audit Competency Framework, The IIA, 2022. 16 Law No. 114/2015 on Internal Audit in the Public Sector, Republic of Albania Assembly, 2015. 17 Law No. 154/2014 for the Organization and Functioning of the State High Control, Republic of Albania, 2014. 11
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