Internal Audit and Compliance

Internal Audit

Fraud Detection

• Identification of fraudulent activities within an organization
• Detection methods:
  • Data analytics and forensics
  • Whistleblower tips
  • Surprise audits
  • Review of unusual transactions
• Fraud risk factors:
  • Incentives/pressure
  • Opportunities
  • Rationalization
• Fraud detection techniques:
  • Benford's Law
  • Data mining
  • Predictive analytics

Risk Assessment

• Identification and evaluation of risks that could impact an organization's objectives
• Risk assessment process:
  1. Risk identification
  2. Risk analysis
  3. Risk evaluation
  4. Risk prioritization
• Risk categories:
  • Strategic risks
  • Operational risks
  • Financial risks
  • Compliance risks
• Risk assessment tools:
  • Risk matrices
  • Heat maps
  • SWOT analysis

Compliance Testing

• Evaluation of an organization's compliance with laws, regulations, and internal policies
• Compliance testing objectives:
  • Identify compliance gaps
  • Evaluate the effectiveness of controls
  • Provide assurance on compliance
• Compliance testing techniques:
  • Transaction testing
  • Attribute testing
  • Inquiries and observations
• Compliance testing areas:
  • Financial reporting
  • Tax compliance
  • Regulatory compliance

Audit Reporting

• Communication of audit findings and recommendations to stakeholders
• Audit report components:
  • Executive summary
  • Audit objectives and scope
  • Audit findings and recommendations
  • Management response
• Audit report types:
  • Internal audit reports
  • Compliance reports
  • Special audit reports
• Audit report best practices:
  • Clear and concise writing
  • Objective tone
  • Relevant and timely information

Control Evaluation

• Assessment of an organization's internal controls
• Control evaluation objectives:
  • Evaluate the design and operating effectiveness of controls
  • Identify control weaknesses and opportunities for improvement
• Control evaluation techniques:
  • Walkthroughs
  • Control self-assessment
  • Control testing
• Control evaluation areas:
  • Financial reporting controls
  • Operational controls
  • IT controls
• Control evaluation criteria:
  • Control environment
  • Risk assessment
  • Control activities
  • Information and communication
  • Monitoring