Performance Auditing Internal Auditing

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Performance Auditing - Internal Auditing
Committee on Performance Excellence, August 18,
2009
Presented by DAS Chief Audit Executive -
Pamela J. Stroebel Valencia, CPA, CIA
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Objectives

• Introduction to internal auditing
• Comparison of external and internal auditing
• Overview of internal audits role in performance
  auditing
• Governance
• Current state of internal auditing in Oregon
  State Government.

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Definition of Internal Auditing

• Internal auditing is an independent, objective
  assurance and consulting activity designed to add
  value and improve an organizations operations.
  It helps an organization accomplish its
  objectives by bringing a systematic, disciplined
  approach to evaluate and improve the
  effectiveness of risk management, control and
  governance processes.
• The Institute of Internal Auditors,
  International Professional Practices Framework

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Internal versus External

• Objectives and Audience vary slightly
• Internal audits primary objective is providing
  information to improve decision making and its
  audience is Management
• External audits primary objective is
  accountability and its audience is the taxpayer
  and lawmakers

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Internal versus External

• Audit work performed is similar
• Internal Auditors are primarily performance
  auditors
• Most financial auditing is performed by external
  (i.e. Oregon Audits Division performs Single
  Audit of Oregons CAAFR)
• Both may instigate or become involved in special
  reviews and investigations
• Law and standards require both groups to
  coordinate and work together.

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Performance Objectives

• Compliance
• Information Technology
• Program effectiveness or efficiency
• Internal Control
• Consulting

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Risk-based Performance Auditing

• Internal auditors assess risk across their entire
  organization
• From this risk assessment, audit topics are
  selected
• Additional criteria may be applied (i.e. last
  audited, auditable, expertise available,
  management requests)
• The Audit Committee approves the annual
  risk-based audit plan.

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Governance

• The combination of processes and structures
  implemented by the board (management) in order to
  inform, direct, manage, and monitor the
  activities of the organization toward the
  achievement of its objectives.
• Internal auditors are required by law and
  standards to audit Governance.

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Governance

• It is important for management to be able to link
  their strategic plan, performance measures, risk
  assessment, and budget in order to make effective
  business decisions.
• Helping management determine if they are
  effectively measuring their key strategic
  objectives accurately can be an important role
  for internal auditors.

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Governance

• Governance audit topics may include
• Governance structures, policies, charters
• Ethics, culture and values of the organization
• Strategic planning and decision making
• Performance management/measurements
• Risk management structures and policies
• Fraud control and policy
• Enterprise web page content
• Compensation policies and content
• Governance, ethics and potential for fraud should
  be considered in ALL audit engagements.
• Internal auditors should work with management to
  ensure recommendations resulting from audit
  findings are reasonable, add value and are
  cost-effective.

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Governance of Internal Audit

• Agency Audit Committee
• Provides oversight and increased independence to
  the internal audit function.
• Statewide Audit Advisory Committee
• Mission Promote excellence and professional,
  standards-based internal auditing services in
  state government
• Membership includes DAS Director, Director of
  Audits Division, Legislative Fiscal Officers
  designee, and representatives of agency
  Management, Chief Audit Executive, and private
  sector.

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Internal Audit Capacity in State Government

• Currently, 31 state agencies meet the criteria
  established in Oregon Administrative Rule by DAS
  which requires an internal audit function (FTE,
  biennial expenditures, cash processed annually)
• 28 agencies have an established internal audit
  function or are meeting the requirement through
  contracted services.

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Questions?

• For further information
• Pamela Stroebel Valencia, DAS Chief Audit
  Executive
• Pamela.valencia_at_das.state.or.us
• 503-378-4037
• http//oregon.gov/DAS/SAAC.shtml