Internal Auditing: Basics & Best Practices

About the Author

DAVID MCNAMEE, CIA, CISA, CFE, CGFM

David McNamee has thirty years experience in audit and data systems, including previous experience as a Director of Internal Audit at a multi-billion dollar corporation. He is President of his own consulting firm, Management Control Concepts, to offer his expertise in internal audit and risk management to others for the past dozen years.

David McNamee has been a frequent invited speaker at international and regional internal auditing conferences on the topics of ethics, risk assessment, and internal audit management, as well as local chapter meetings and seminars for the IIA, AGA, ISACA and others. He is the author of many articles in professional internal auditing journals, including an award-winning research paper on resolving ethical problems. In addition, he has authored several books published by the IIA on risk assessment, procurement and operational auditing. He has been active in the Institute of Internal Auditors at the local and international levels.

David McNamee is a Certified Internal Auditor, a Certified Information Systems Auditor, a Certified Fraud Examiner, and a Certified Government Financial Manager. He has contributed to improving the audit function with industry, government and not-for profit organizations all over the world.

David McNamee holds a Master of Science in Telecommunications Management, a Master of Business Administration, and a Certificate in Purchasing Management. He has taught Financial Accounting at the Santa Clara University Graduate School of Business and is an invited lecturer in Auditing at San Francisco State University and at universities in New Zealand and Australia. For seven years he was an instructor in the CIA Review Course sponsored by the San Francisco Chapter of the IIA.

In this electronic publication he shares with us the vast amount of knowledge he has gained in his 30 years experience about “Internal Auditing: Basics and Best Practices”.

His publications include "Achieving Auditor Excellence", “Auditing Fraud”, "Auditing Purchasing and Contracts", “Control Self Assessment”, "Internal Audit: Basic and Best Practices", and “Risk Management and Risk Assessment” publications - available separately or cost-saving set at http://www.pleier.com.

Internal Auditing: Basics & Best Practices

Over the past two decades, David McNamee has been privileged to help a number of Audit Departments improve the capabilities of their internal audit staff and has taught senior management how to “see around corners.” His practice has taken him all over the world working with all types of organizations.

David decided to share the tools that he uses in his much sought after in-house training in this extremely cost-effective format so that Audit Departments of every size can benefit from his knowledge and expertise.

Use the enclosed PowerPoint to review as individuals or as a group while using a copy of the workbook to learn the Basics and Best Practices of Internal Auditing. Read the clearly illustrated material and perform the 14 exercises in the workbook in sequence. Use these tools in a field-tested, structured, and interesting approach for initial training of junior level auditor or refresher training of any auditor.

Auditors and Audit Departments that purchase this electronic publication on CD can duplicate the enclosed workbook royalty free for training of individual auditors in that department and for in-house group training.

Professional Organizations that purchase this electronic publication on CD can duplicate the enclosed workbook and use that material to conduct group training by sending a royalty fee of $20 for each copy of the workbook to:

Pleier Corporation
Attn: Best Practice Workbook
P.O. Box 3900
Mission Viejo CA 926901-1900
United States of America

When professional associations forward a check please include the place and date that the training was held.

Your feedback at pleier@pleier.com about this publication would be most appreciated.

Internal Auditing: Basics & Best Practices Presentation

"Internal Auditing: Basics & Best Practices PowerPoint Presentation"

The 85-slide PowerPoint offers a number of practical suggestions as to what are the basics and best practices that Internal Auditors should learn and apply.

This PowerPoint is an excellent complement to the workbook by providing assistance in understanding the material in either a self-study or group training situation and includes the following topics:

The Purpose of Internal Auditing
IIA Statement of Responsibilities
The Audit Process Model
The Audit Charter
The Nature of Business Risk
Managers Put Assets at Risk
Prudent Management Takes Risks
The Strategic Nature of Risk
Risk Terms
Control and Risk
Controls Support the Business Process
Defining the Business Process
COSO Control Model
The Essential Characteristics
Internal Audit Framework
Independence and Objectivity
Establishing Audit Objective and Scope
Types of Audits: Objective and Scope
Planning the Audit
The Importance of a Clearly Defined Scope
Audit Scope Development
Guarding Against Giving Out Vague Assignments
Tap the Resources of the Group
Research and Research to Avoid
Research Methods
Prepare Your Hypothesis
Using the Hypothesis
The Deming Cycle
The Nature of Evidence
Evidence Characteristics
Evidence Types
Evidence Strength
Structured Walk-Through
Designing Audit Tests
The Role of Statistics in Tests
Non-Statistical Sampling
The Nature of Fraud
The 3 Factors of Fraud
Conditions for Fraud
The Red Flags of Fraud
Documenting the Audit
Working Papers: Good Practices
The Elements of Good Working Papers
A Framework for the Audit
Writing Up Conclusions
Additional Best Practices
Summarizing and Evaluating Results
Evaluating Evidence: So What?
The Audit Memorandum
Tools to Find Root Cause
Ishikawa/Fishbone Diagrams
Developing Findings
Enhancement to the Process
Summary of Findings Form
Audit Score Card
Writing Effective Audit Reports
Communicate to be Understood
Audit Report Types
New Types of Reports
Following Up for Effectiveness
Following Up: Corrective Action
Following Up: Methods
Dealing with Repeat Findings
Roles and Relationships
Collaboration and CoActive Principles
Audit Interaction
Conditions for Success
Building Trust
Measures of Fear
Roadblocks to Collaboration
Team Auditing and Team Effectiveness
What Makes a Team?
Five Steps to Team Effectiveness
Team Meetings
Meeting Agendas
Building a Successful Team
Common Team Problems

Internal Auditing: Basics & Best Practices Workbook

"Internal Auditing: Basics & Best Practices Workbook"

This compact 87-page workbook is a complete course to use for individual or group study to better understand the basics of internal auditing and the best practices used by world-class Internal Audit Departments.

This workbook is a 3-day course to introduce the basic skills for beginning internal auditors or to serve as a refresher in “best practices” for intermediate level internal auditors.

The workbook uses the setting that you have just formed a new internal audit group “The Quality Review Team” to perform internal operational audits.

If used for group training, it is best given to the staff for 1 day per week over 3 weeks with an appropriate reading list in company manuals and internal audit standards in between.
This workbook publication presents practical information including:

Day 1:

The Purpose of Internal Auditing

Exercise 1: The Purpose of the Quality Review Team

Exercise 2: Developing an Audit Charter

The Nature of Business Risk and Internal Control

The COSO Sequence: Established Objectives--Risks--Controls
The Management Imperative: Putting assets at risk to achieve objectives

Exercise 3: Define the Business Process

Exercise 4: Identifying the Risks in the Business Process

Exercise 5: Identifying the Controls in the Business Process

The Internal Audit Framework

The Audit Model: Comparing What Is with What Should Be
The Conditions of Independence and Objectivity

Exercise 6: Defining the Audit Process

Day 2:

Beginning the Audit

Establishing the Audit Objective and Scope
Planning the Audit

Exercise 7: Audit Scope and Objectives

The Nature of Evidence

Working Backward from the Audit Objective
Matching the Evidence to the Audit Objective
Defining Audit Tests

Exercise 8: Defining the Evidence Requirements

The Nature of Fraud

The Conditions of Fraud
The Red Flags of Fraud in the Purchasing Cycle
Video: The Role of the Auditor in Dealing with Fraud

Exercise 9: Developing the Red Flags of Fraud for ProCards

Documenting the Audit

The Elements of Good Working Paper Technique
Building a Framework for the Audit Process
Different Techniques for Different Audit Objectives

Exercise 10: Developing a Set of Working Paper Standards

Day 3:

Summarizing and Evaluating Results

Developing Conclusions from Tests
Developing Findings: Enhancements and Assessments

Exercise 11: Pulling it Together

Writing Effective Audit Reports

Principles of Good Communication
Words to Use and Words to Avoid
Alternative Types of Reports

Exercise 12: Defining the Audit Report

Following Up for Effectiveness

Follow-up Methods
Dealing with Repeat Findings

Exercise 13: Establishing Procedures for Follow-up

Roles and Relationships in Auditing

Collaboration and CoActive Principles
Team Auditing and Team Effectiveness

Exercise 14: A Personal Commitment to Improving Team Effectiveness

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