4 T H EDITION

Internal Auditing:
Assurance &
Advisory Services

Internal Auditing: Assurance &Internal

AdvisoryAuditing:
Services,Assurance
4th Edition&©Advisory
2017 byServices,
the Internal
4th Edition
Audit Foundation.
© 2017 by the Internal Audit Foundation.
CHAPTER 12

Introduction to the
Engagement Process

Internal Auditing: Assurance &Internal

AdvisoryAuditing:
Services,Assurance
4th Edition&©Advisory
2017 byServices,
the Internal
4th Edition
Audit Foundation.
© 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process

LEARNING OBJECTIVES

◼ Understand the types of

engagements internal auditors
perform.
◼ Understand the key activities
involved in planning and
performing an assurance
engagement and reporting the
engagement outcomes.
◼ Describe how the consulting
engagement process differs from
the assurance engagement
process.

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
STANDARDS RELATED TO
THE ENGAGEMENT PROCESS

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
ASSURANCE & CONSULTING
ENGAGEMENTS

 Assurance Services – An objective

examination of evidence for the
purpose of providing an independent
assessment on governance, risk
management, and control processes
for the organization.
 Consulting Services – Advisory and
related [customer] service activities,
the nature and scope of which are
agreed with the [customer], are
intended to add value and improve an
organization’s governance, risk
management, and control processes
without the internal auditor assuming
management responsibility.

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
PLAN ACTIVITIES

◼ Determine engagement objectives and scope

◼ Understand the auditee, including auditee objectives and
assertions
◼ Identify and assess risks
◼ Identify key controls
◼ Evaluate adequacy of control design
◼ Create a test plan
◼ Develop a work program
◼ Allocate resources to the engagement
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
PERFORM ACTIVITIES

◼ Conduct tests to gather evidence

◼ Evaluate evidence gathered and reach conclusions
◼ Develop observations and formulate recommendations

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
 Chapter 12: Introduction to the Engagement
Process
COMMUNICATE ACTIVITIES

◼ Perform observation evaluation and escalation process

◼ Conduct interim and preliminary engagement
communications
◼ Develop final engagement communications
◼ Distribute formal and informal final communications
◼ Perform monitoring and follow-up procedures

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
OBSERVATION LEVELS &
DISTRIBUTION APPROACHES

◼ Not an observation
◼ Observation
◼ Reportable observation
◼ Significant Observation

Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 12: Introduction to the Engagement
Process
SUMMARY

◼ There are two types of engagements

◼ Assurance engagements
◼ Consulting engagements

◼ There are three phases in assurance engagements

◼ Plan
◼ Perform
◼ Communicate

◼ There are four levels of observations

◼ Not an observation
◼ Observation
◼ Reportable observation
◼ Significant observation
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.