Planning an Internal Audit (SIA-1)

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Planning an Internal Audit (SIA-1)
  • Objectives of Planning:
    • An “internal audit plan” is a document defining the scope, coverage and resources, including time, required for an internal audit over a defined period.
    • The internal auditor should, in consultation with those charged with governance, including the audit committee, develop and document a plan for each internal audit engagement to help him conduct the engagement in an efficient and timely manner.
    • A plan once prepared should be continuously reviewed by the internal auditor to identify any modifications required to bring the same in line with the changes, if any, in the audit environment. However, any major modification to the internal audit plan should be done in consultation with those charged with governance and should be documented.
  • Factors Affecting the Planning Process:
    • The objectives and significant risks of the activity being subjected to internal audit.
    • The risk management and internal control system in the organization
    • The possible areas of risk management and/ or internal control system where improvements can be suggested
    • The selection of team and the assignment of audit work to the team members
    • Business and Industry developments affecting the entity, including changes in information technology and business processes, changes in key management, and acquisitions, mergers and divestments.
    • Changes in the financial reporting framework, such as changes in accounting standards and changes in the legal environment affecting the entity.
  • Scope of Planning:
    • Obtaining the knowledge of the legal and regulatory framework, entity’s accounting and internal control systems and policies and their effectiveness.
    • Determining the nature, timing and extent of procedures to be performed.
    • Identifying activities that need special focus based on the materiality of such activities
    • Identifying and allocating staff to the different activities, setting the time budget
    • Identifying the reporting responsibilities
  • Planning Process:
    • Obtaining Knowledge of the Business
    • Establishing the Audit Universe
      • Audit universe comprises the activities, operations, units etc., to be subjected to audit during the planning period.
    • Establishing the Objectives of the Engagement
    • Establishing the Scope of the Engagement
    • Deciding the Resource Allocation
    • Preparation of Audit Programe

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