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Module1, Part 2 OpAud - Asynchronous, Risk-Based

The document provides an overview of internal auditing, operational auditing, and risk-based auditing. It defines internal auditing as an independent and objective activity designed to add value and improve operations. Operational auditing evaluates management performance, adherence to policies, organizational structure, and effectiveness of business activities. Risk-based auditing identifies and evaluates controls based on understanding organizational risks and objectives. The document discusses how auditing has expanded beyond accounting to include other areas like operations management, human resources, and corporate social responsibility. It outlines an organization's primary stakeholders and their interests and power, as well as secondary stakeholders.

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MA. CARMELLA VALDEZ
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© © All Rights Reserved
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53 views

Module1, Part 2 OpAud - Asynchronous, Risk-Based

The document provides an overview of internal auditing, operational auditing, and risk-based auditing. It defines internal auditing as an independent and objective activity designed to add value and improve operations. Operational auditing evaluates management performance, adherence to policies, organizational structure, and effectiveness of business activities. Risk-based auditing identifies and evaluates controls based on understanding organizational risks and objectives. The document discusses how auditing has expanded beyond accounting to include other areas like operations management, human resources, and corporate social responsibility. It outlines an organization's primary stakeholders and their interests and power, as well as secondary stakeholders.

Uploaded by

MA. CARMELLA VALDEZ
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Module 1 Part 2

Gerardo M. Castro, MBA


What is Internal Audit?

Internal auditing is an independent, objective assurance and


consulting activity designed to add value and improve an
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.

Institute of Internal Auditors (IIA)


So…….
What is Operational Auditing?

Future- Improve
Oriented Profitability
Management
Independent
Management-Controlled
Systematic Attain
Organizational Activities
Business- Organizationa
Management-Controlled
Focussed l Objectives
Third Party Activities
Evaluation
Other Aspects of Operations Audit

Evaluates Management Performance.


Verifies employees’ adherence to policies and procedures.
Verifies qualitative aspects of the organization and its activities.
Verifies the relevance of documents.

Checks the organizational structure.


Evaluates effectiveness and efficiency of business activities,
processes, programs, functions, and units.
Responsible for risk management.
A probability or threat of damage,
Risk injury, liability, loss, or any other
negative occurrence that is caused
by external or internal vulnerabilities,
and that may be avoided through
preemptive action.
Risk-Based Audit

Accounting & Poor Customer


Financial Risks Service
Excessive Customer/
Delays Employee Turnover

Waste Poor Quality Data

Inefficiency Systems Failure


Identifies and evaluates Requires in-depth understanding
internal controls without of the organization’s
enough regard to their business, and a
value to the process. mechanism to address
past, present, and
Control-Based future vulnerabilities
Audit and scenarios
Risk-Based that threaten the
Audit achievement of
business objectives.
Auditing Beyond Accounting,
Financial, and Regulatory Requirements
Reflection
In the past, internal auditors predominantly had
accounting degrees, generally were recruited
from external public accounting/audit firms, and held
CPA licensure certifications. As such, their focus
and experience was acquired in the accounting field
and saw most audit matters through the prism of
accounting requirements.
Auditing Beyond Accounting,
Financial, and Regulatory Requirements

Operations Management Corporate Social Responsibility

Human Resources Marketing

Information Technology Environment, Health & Safety


Auditors’ Value

√ Promote the efficient and effective use of resources.


√ Avoid any conflict of interest.
√ Help to assure that all relevant stakeholders’ interests are met.
√ Help to assure that organizational behaviours are aligned
with organizational objectives.
√ Serve the public and common interests.
Economic/Primary
Stakeholders Employees

Investors Suppliers

Creditors Customers
Non-Economic/Secondary
Stakeholders
Government

General
Public Media

Communities
Activists

Business
Support
Groups
Primary Stakeholders, Interests and Power
Stakeholder Interest Power
Employees Employment stability Bargaining power,
Fair pay, safe workplace strike, lawsuits,
and environment publicity
Suppliers Regular orders for Refuse to take orders,
goods & services, Su
payment pply to competitors
Customers Value & quality for Order from competitor,
money, safe & reliable Boycott, payment
products refusal
Creditors Payment for loans, Lawsuits to demand
collect debts with payment, repossession
interests of assets
Investors Satisfactory return on Voting rights, inspect
investment, value company records and
appreciation reports.
Secondary Stakeholders, Interests and Power
Stakeholder Interest Power
Governments Economic development, Laws, regulations, licenses,
Taxes permits
Media Public information, monitoring of Publicizing events that affect the
company actions public, create public opinion.
Activists Monitor company actions for Lobbying government for
ethical & legal behaviour regulations,
Gaining public support
Business Support Groups Research & information to Use staff to help companies,
improve competitiveness Provide legal & political support
Communities Ensure local development, Lobbying for government
employ local residents regulations, issuing & issuing
operating licenses

General Public Minimize risks, achieve Supporting activists, pressing the


prosperity for society gov’t. to act, praising or
condemning companies.
Secondary Stakeholders, Interests and Power
Stakeholder Interest Power
Governments Economic development, Laws, regulations, licenses,
Taxes permits
Media Public information, monitoring of Publicizing events that affect the
company actions public, create public opinion.
Activists Monitor company actions for Lobbying government for
ethical & legal behaviour regulations,
Gaining public support
Business Support Groups Research & information to Use staff to help companies,
improve competitiveness Provide legal & political support
Communities Ensure local development, Lobbying for government
employ local residents regulations, issuing & issuing
operating licenses

General Public Minimize risks, achieve Supporting activists, pressing the


prosperity for society gov’t. to act, praising or
condemning companies.
Source:

Murdock, H. (2017). Operational Auditing: Principles and Techniques


for a Changing World. CRC Press Taylor & Francis Group, London,
New York.

Note: This is the prescribed textbook for the course Operations Audit (ELE 1).
End of Asynchronous Session

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