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INTERNAL AUDIT ANNUAL PLANNING, ENGAGEMENT

PLANNING AND EXECUTION

1Internal Audit Annual Planning, Engagement Planning and

Execution

• Annual Audit Planning,• Engagement Planning,• Engagement Execution.

SESSION PLAN

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Execution2

Calculation of Total Available Resources,Allocation of Total Available Resources among appropriate

engagements,Assignment of staff to the appropriate engagements, Coordination of annual plan with other assurance providersContinued review of the Actual vs Annual Plan.

Elaboration of Annual Plan

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Execution3

Available Resources Necessary Resources<

Integration of External Resources

Integration of External Resources

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Execution4

Should be derived from Internal Audit Strategic Plan,

Details allocated time and resources for each engagement and provides more detailed information to the user compared to Strategic Plan,

Resource allocation is made based on experience and competences of the team members.

Allocation of resources andassignment of staff

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Execution5

External Audit, External assessment of internal audit activity, Inspections undertaken by various public authorities.

Coordination of annual plan with other assurance providers

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Execution6

Engagement cannot be planned if not included in the annual plan,

For non planned engagements, annual plan is revised,Changes made to the activity of the entity (auditee),Changes made to the assessed risks of the entity

(auditee),Changes made to the resource plan,Errors/omissions identified in prior year annual plan,

that should be included in the present annual plan.

Actual vs Annual Plan

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Execution7

1• PLANNING

2• EXECUTION

3• REPORTING

4• FOLLOW UP

ENGAGEMENT MANAGEMENT PHASES

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and Execution8

1) Composition of audit team and kick-off meeting with the team and auditee,

2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.

Engagement Planning: Phase 1

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and Execution9

Independence of auditors,Scope and nature of activities of the auditee,Risk grade of the auditee, Competence of the staff, Training needs.

Composition of audit team

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Kick of meeting with the team

Nature, stance and timing of

the work

Kick off meeting with auditee

Demanded information, timing of the

works

Kick off meetings

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1) Composition of audit team and kick-off meeting with the team and auditee,

2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.

Engagement Planning: Phase 1

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Legal acts regulating activity of the auditee,Charter of the auditee,Prior period engagement files,Job descriptions of the auditee staff,Risk register provided by the auditee,External audit reports,Reports provided by other assurance providers.

Preliminary survey

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and Execution13

Risk groupInternal

control risk grade

Overall risk grade

Risk Reassessment

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1) Composition of audit team and kick-off meeting with the team and auditee,

2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.

Engagement Planning: Phase 1

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and Execution15

Should be derived from annual plan,Should be based on risk assessments,Should be based on the internal controls of the

auditee, Should be based on the risk grade of the auditee,Should provide link to auditee’s objectives

Audit objectives

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and Execution16

1) Composition of audit team and kick-off meeting with the team and auditee,

2) Preliminary survey,3) Audit objectives,4) Audit scope,5) Audit program.

Engagement Planning: Phase 1

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and Execution17

Audit team in charge should decide: Internal controls to be tested, Timing of tests, Stance of the tests.

Audit scope should be sufficient enough to achieve the audit objectives

Audit scope

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The audit program defines:Audit objectives, Audit procedures/tests,Audit assertions.

Audit program

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and Execution19

Appropriate

Sufficient Quantity

Quality

Audit evidence

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Completeness

Existence

Cut off

Legality

Presentation

Obligations and rights

Accuracy

Valuation

CEAVOP&L

Audit Assertion

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and Execution21

Verification Observation

External confirmation

InquiryRe-performance

Recalculation

Analytical procedures

Audit techniques

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and Execution22

Audit tests

Substantive tests Control tests

Test of details Analytical tests

Testing design and implementation of internal control

Testing operating effectiveness of internal controls

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and Execution23

Audit techniques

• Verification• Recalculation• External confirmation• Analytical procedures• Inquiry

Substantive tests Control tests

• Verification• Observation• Re-performance• Inquiry

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Control systems

Preventive control systems

Detective control systems

Intern control systems

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Audit techniques

Audit tests

Audit asserti

ons

Control syste

m of the

entity

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1 • PLANNING

2 • EXECUTION

3 • REPORTING

4 • FOLLOW UP

ENGAGEMENT MANAGEMENT PHASES

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and Execution27

1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

Engagement Execution: Phase 2

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Internal control system documentation/description of the auditee,

Walkthrough testing,Identification of internal control design

weaknesses and conclusion on effectiveness of the system

Testing design and implementation of control

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Public sector entityDepartment of

cash operations of MoF (auditee)

Central Bank of Armenia

Contract

Yes/No

Payment Order

Approved Invoice

Payment

Refusal

Information Flow Chart

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and Execution

Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

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• The nature of the tests,• The timing of the tests,• The stance.

Testing operating effectiveness of control

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During the organization of a sample the following points should be observed:Type of sampling,Sample size,Detected errors and extrapolation of the results.

Sampling

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Statistical samplesRandom,Systematic,Sequential,Monetary Unit Sampling (MUS).

Non-statistical sampling haphazard sampling, Snowball sampling.

Sampling Types

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and Execution

Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

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Substantive tests

Test of details Analytical tests

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- Examination of supporting documentation, - Errors and omissions are detected,- The nature and extent of tests depends on:• Risk grade of the auditee,• Results of control tests,• Fraud risk.

Substantive tests

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38Internal Audit Annual Planning, Engagement Planning

and Execution

Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

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Audit objective,Work done,Audit assertions,Results of the work, including errors, omissions and

weaknesses identified, audit evidence,Auditor judgement fo achieving audit objective,Audit objective conclusion,Who has prepared the WP,Date of the WP.

Preparing audit WP (working papers)

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and Execution39

40Internal Audit Annual Planning, Engagement Planning

and Execution

Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

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All the WPs should be reviewed by both team in charge and Chief Internal Auditor,

Appropriateness of reached conclusions,Conduct of on job training and

supervision.

Review of the WP

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42Internal Audit Annual Planning, Engagement Planning

and Execution

Engagement Execution: Phase 2The second phase consists of the following steps:1) Testing design and implementation of controls,2) Testing operating effectiveness of controls,3) Substantive tests,4) Preparing working papers,5) Review of working papers,6) Wrap up,7) Closing meeting.

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Predefined formatCriteria,Condition, Cause, Effect.

Exception Report

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• Exception report produced based on the WPs,• Closing meeting with auditee– Discussing errors, omissions and internal control

weaknesses,– Exception report.

Wrap up and Closing Meeting

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