Quality evaluation and improvement for Internal Audit Svilena Simeonova

1. Quality evaluation and improvement for Internal Audit Svilena Simeonova

2. CONTENTS Quality of Internal Audit – review Legal and methodological framework Quality Assurance and Improvement Program (QAIP) Internal assessments External assessments Benchmarks for the assessment Internal Audit maturity model of the IIA related to QAIP Role of the central coordination units for Quality assurance process

3. 1. QUALITY OF INTERNAL AUDIT – REVIEW • Meeting expectations of the head of the organisation, audit entities, Audit Committee and other stakeholders; • Conformity with the standards, definition and Code of Ethics; • Conformity with legal requirements • Adding value for the organization • Contribution to the effectiveness and efficiency of the governance, risk management and control processes • Providing relevant assurance and consultancy

4. LEGAL AND METHODOLOGICAL FRAMEWORK (1) • International Standards for Professional Practice of Internal Auditing of the Institute of Internal Auditors • 1300– Quality Assurance and Improvement Program • The chief audit executive must develop and maintain a quality assurance and improvement program that covers all aspects of the internal audit activity. • 1310– Requirements of the Quality Assurance and Improvement Program • The quality assurance and improvement program must include both internal and external assessments. • 1311 – Internal Assessments • Internal assessments must include: •  Ongoing monitoring of the performance of the internal audit activity; and •  Periodic self-assessments or assessments by other persons within the organization with sufficient knowledge of internal audit practices. • 1312- External Assessments • External assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organization.

5. LEGAL AND METODOLOGICAL FRAMEWORK (2) • Standards of the Institute of Internal Auditors • 1320– Reporting on the Quality Assurance and Improvement Program • The chief audit executive must communicate the results of the quality assurance and improvement program to senior management and the board. • 1321 – Use of “Conforms with the International Standards for the Professional Practice of Internal Auditing” • The chief audit executive may state that the internal audit activity conforms with the International Standards for the Professional Practice of Internal Auditing only if the results of the quality assurance and improvement program support this statement. • 1322 – Disclosure of Nonconformance • When nonconformance with the Definition of Internal Auditing, the Code of Ethics, or the Standards impacts the overall scope or operation of the internal audit activity, the chief audit executive must disclose the nonconformance and the impact to senior management and the board.

6. LEGAL AND METODOLOGICAL FRAMEWORK (3) • The IIA Practice Advisories • The IIA’s Quality assurance and improvement program Practice Guide 2012 • National laws • National Standards • Guidance documents, ordinances, IA Charters, manuals • National rules follow and specified the IPPF Standards requirements

7. QUALITY ASSURANCE AND IMPROVEMENT PROGRAM (1) • The program is the key tool for maintaining quality and developing the Internal Audit function • Aims of the QAIP: • To evaluate conformity with the Definition, The Standards and the Code of Ethics • To assess the efficiency and effectiveness of IA activity • To identify opportunities for improvement • Communication of the QAIP

8. QUALITY ASSURANCE AND IMPROVEMENT PROGRAM (2) • Content of the QAIP: • Internal Assessment • External Assessment, the both focus on: • The purpose and position of the IA unit; • The unit’s structure and resources for delivering the service expected of it; • The efficiency and effectiveness of the output-oriented auditing process; • Positive demonstrable impact on governance, risk management and control processes

9. QUALITY ASSURANCE AND IMPROVEMENT PROGRAM (3) • SCOPE / PERSPECTIVES OF THE QAI PROGRAM:

10. 4. INTERNAL ASSESSMENTS (1) • ONGOING MONITORING OF IA ACTIVITY • An integral part of day-to-day work • Consists of supervision, review and measurement of the IA engagements • Is incorporated into the routine policies and practices • The procedures should be clear, applicable and not overly complex • Performed by Chief Audit Executive or another internal auditor appointed by CAE

11. 4. INTERNAL ASSESSMENTS (2) • PERIODIC SELF-ASSESSMENT • Review of selected part of documentation of the IA engagement; • Questionnaires, interviews, survey, including feedback from the audit entities; • Comparison with the best professional practices • ASSESSMENT BY OTHER PERSONS WITHIN THE ORGANIZATION WITH SUFFICIENT KNOWLEDGE OF IA PRACTICE • Appropriate method for small IA units

12. 5. EXTERNAL ASSESSMENTS (1) • Two types External assessments • Full external assessment by an independent competent assessor or team • Self-assessment with independent external validation • Frequency – at least once every five years • Evaluation of conformity with the Standards, legislation, Code of Ethics and effectiveness of the IA activity too • Aimed to find opportunities for improvement

13. 5. EXTERNAL ASSESSMENTS (2) • What is the scope of the External assessment ? • Purpose and positioning • Structure and resources • Audit execution • Impact • Procedures • Recommendations and Action plan for improvement • Different practices and approaches ( peer reviews)

14. 5. BENCHMARKS FOR THE ASSESSMENT • Combination of quantitative and qualitative indicators: • Numbers of audits performed • Number of recommendation issued and implemented • Quality of the findings in terms of materiality • Quality of recommendations in terms of impact • Degree of risks covered • Amendments to the management and control set-up resulting from IA activities

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17. 8. ROLE OF THE CENTRAL COORDINATION UNITS FOR QUALITY ASSURANCE PROCESS • Todevelop guidelines • To collect information • To provide examples of good practice • To monitor and review • To participate in peer reviews

18. Thank you!