KnowledgeLeader Blog

The process of purchasing materials and supplies comprises procedures and activities to acquire goods in the correct quantity and in a timely manner. The process should include how purchases are started (e.g., inventory levels), who is involved and how it is made. In addition, the process covers the communication of purchases to all required areas of the company (e.g., accounting). Inventory management follows and starts from the time inventory purchases are received to the time the inventory is sold to the customer and payment is received.

The digital revolution currently taking place is transforming our world. Over the next few years, many organizations will need to undertake radical change programs and, in some cases, completely reinvent themselves to remain relevant and competitive.

What should the audit committee’s relationship be with an organization’s board of directors, compensation committee, disclosure committee, and nominating and governance committee?

In a world of rapid change on almost every front at which organizations must adapt and grow or risk decline and their ultimate demise, everybody faces the same reality — either continuously improve their efforts to contribute sustainable value or be left behind. The chief audit executive (CAE) is no exception. As the risks and complexities companies face change, so do the focus, skill sets and capabilities needed by internal audit.

Auditing Standards for Internal Audit

The Institute of Internal Auditors (IIA) promulgates the International Professional Practices Framework (IPPF) which includes Mandatory Guidance and Recommended Guidance.

Mandatory Guidance:

• Core Principles for the Professional Practice of Internal Auditing
• Definition of Internal Auditing
• Code of Ethics
• International Standards for the Professional Practice of Internal Auditing 

Recommended Guidance:

• Implementation Guidance
• Supplemental Guidance

10 Important Roles of the Audit Committee in Internal Audit

Although the exact nature, charter, scope and reporting lines of internal audit may vary between companies, the audit committee plays a key role in supporting and overseeing aspects of an internal audit function’s activities. While needing to ensure that it does not assume day-to-day oversight activities on behalf of management or the internal audit function, the audit committee should generally be involved in the following matters:

What is the Second Line of Defense?

Essential to effective risk management, the lines-of-defense model is implicit in COSO’s internal control framework through the control environment, control, activities, monitoring and other components of an internal control system. It provides assurance to the board of directors, as the elected representatives of the shareholders to oversee the organization’s operations on their behalf, that risks are reduced to a manageable level as dictated by the organization’s appetite for risk. Much more than “segregating incompatible duties” and “ensuring checks and balances,” the lines-of defense model emphasizes a fundamental concept of risk management: From the boardroom to the customer-facing processes, managing risk is everyone’s responsibility.

An effective business process is built on a set of well-defined and clearly stated business objectives. These key objectives articulate the ideal performance results that the company expects from that process. To monitor a business process so that it stays focused on reaching the key objectives, the company chooses appropriate performance measures. Careful selection of the performance measures takes a company a long way toward improving a business process. Thus, to build and continually improve an effective business process, a company establishes:

What is internal auditing?

Internal audit (IA) reporting may be the biggest challenge in the audit process next to scheduling the audit itself and implementing recommendations in today’s complex and competitive corporate environment. An audit report presents results of an examination or review within the organization and is considered by many to be the core deliverable of audit services. Therefore, the importance of good reporting cannot generally be exaggerated.