Internal Auditing

Introduction Preview 01:20

Welcome to the first course in the Internal Auditing series! This first part is designed to help you perform internal control audits over financial reporting. These types of audits are usually integrated with financial statement audits. This class is designed for beginners. We will learn terminology and have mini-quizzes along the way to retain the content. Also, we will put into practice what we learn with an audit scenario at the end of the course.

Internal Auditing Overview Preview 04:46

Audits involve examining and analyzing evidence and then reporting on their findings. This is true of both large and small businesses. This lesson will help familiarize you with key concepts in audit, which will enable you to begin performing internal audits at your organization.

Definitions of Key Terms Preview 03:09

There are many important terms in the world of internal auditing; however, I will focus on the a few of the most important and widely-used terms that you will hear throughout the course or in real-life when performing internal audits.

Audit Frameworks and Standards Preview 02:01

What are audit frameworks and standards? How are they used? In this lesson, I will explain them both and how they are related and why they are important.

Audit Engagement Process Preview 01:48

The audit process is similar for most engagements and normally consists of four stages: Planning, Fieldwork, Reporting, and Follow-up/Post-Audit Review.

Audit Evidence Preview 01:18

Audit evidence is evidence obtained during an audit (usually in the Fieldwork phase) and recorded in the audit working paper documentation. Audit working paper documentation includes, for example, audit programs, analyses, issues memoranda, summaries of significant findings or issues, letters of confirmation and representation, checklists, abstracts or copies of important documents, correspondence (including e-mail) concerning significant findings or issues, and schedules of the work the auditor performed.

Audit Objectives Preview 01:17

Audit objectives are broad statements developed by auditors and define intended audit goals. Understanding audit objectives will be important in the Planning phase when developing the audit work plan for Fieldwork testing.

Planning Phase Preview 06:42

In the Planning phase, the auditor plans the scope (time period covered) of the audit; determines the audit objective; understands what documentation should be examined; collects documents from previous audits; sends questionnaires or surveys to the auditees (i.e. business unit being audited) for background information about the audit subject (i.e. process owners, users, customers, activity details, flowcharts, policies used, etc.)

Memo of Discussion Template Preview 00:39

The Memorandum of Discussion is used to document all communications throughout the course of the audit. This document will then become an audit working paper that you can use as evidence to support audit conclusions and should be retained in the audit project folder or audit working paper software.

Risk and Control Template Preview 03:44

Risks are the events that prevent organizations from meeting their goals. Identifying risks will lead you to the activities (controls) that you will need to examine in the Fieldwork phase to see whether they are working properly to prevent the risk. This template will walk you through the risk assessment process for your audit.

Internal Control Template Preview 01:34

The purpose of this lecture is to identify and document the specific controls that will be examined during the Fieldwork phase. Effective controls reduce the risk of asset loss and help ensure that plan information is complete and accurate, financial statements are reliable, and that the plan complies with laws and regulations.

Audit Work Plan Template Preview 03:21

The audit work plan (also called the Audit program) are lists of audit procedures to be performed by auditors to obtain sufficient, appropriate evidence. The individual procedures are determined after obtaining an understanding of the organization, the financial reporting processes, and determining the audit strategy.

Fieldwork Phase Preview 02:10

The Fieldwork phase is where evidence is gathered according to the detailed procedures in Audit Work Plan developed during the Planning phase. 

Fieldwork Testing: Financial Statements Preview 02:57

The auditor's objective in an audit of internal control over financial reporting is to express an opinion on the effectiveness of the company's internal control over financial reporting. The purpose of the internal controls audit over financial reporting is to understand whether any events present a reasonable possibility of material misstatement to the financial statements.

Reporting Phase Preview 01:21

The report states the audit objective(s), the audit tests performed, the results of the audit tests, and recommendations for improvement. The recommendations should be based on audit conclusions that are supported by audit evidence.

Audit Scenario Preview 05:44

In the Audit Scenario, we will draft an audit finding. Audit findings are results of the audit examinations performed. Understanding how to properly draft audit findings will lead to better audit reports.

Post-Audit/Follow-Up Phase Preview 01:39

Internal Audit should follow-up on all audit findings that were reported. Post-audit follow-up also allow auditors to provide positive feedback and learn valuable lessons to improve their own processes.

Closing Remarks Preview 00:18

You made it to the end! Thank you for taking this course! I hope that you gained some valuable insights into internal audit and how it can benefit your organization. If you are a student, I hope that this helped you with your exams or to better understand some key audit concepts.

Final Exam

This is a final exam that will attempt to force you to apply the knowledge you learned in this course to more complex questions.