Transcript for:
Unit 1 of IIA Syllabus Part 1

hello welcome back and in this video we will be discussing about the unit 1 of iia syllabus part 1 and the resources which i'm using to explain you all the key concepts of the iii part 1 exams is basically based on the i and the glim uh publisher or the gleam content um as i have given you an explanation why i prefer glim over others because it is very concise and precise and it's easy to grasp all the key terms and knowledge especially if you have a background knowledge of accounting and finance or auditing however i will try to explain all the key concepts so you do not miss out on any topic from the iis syllabus this is a brief introduction about myself my experience and my qualification i wouldn't go in detail just in case if you are interested you can pause the slide and you can read it yourself so this is the first unit and this unit basically comprises of 15 of the entire syllabus which means approximately 19 mcqs of out of 125 just come from this unit so if you grasp this unit there is a high possibility that you will be able to cover the the exam by 19 mcqs or about 15 in in percentage terms so it is very crucial to understand because this unit basically um build the foundation for the entire other units as well an entire cia course as well because it talks about standards and other things which are very crucial and very important for the uh for the exam in general but to be more specific as an internal auditor so no matter how experienced you are we always try to refer back to these standards just to see what the standard tell us how to perform how to navigate ourselves in any difficult situation uh this is um just a a just a picture that and just to give you an idea that what we will be covering in this entire syllabus we'll be talking about the mission statement of internal auditor what are the mandatory guidance what are the recommended guidance and there is one more uh crucial uh topic in this unit which i believe is not depicted here but it is about internal audit charter so that is also one of the important element that we will be discussing in this unit so this is a very important um pictorial diagram of ippf ippf stands for international professional practices framework this is basically a terminology used for the key requirements by the institute of intel auditor for from the internal auditors it navigates our behavior it tells us how what we are supposed to do as an auditor day-to-day on a daily basis and it give us a code of conduct by which we have to behave in that manner so basically it is very profound and this ippf is basically the whole internal audit framework so it has multiple components first of all the mission statements it give us the missions that what is the purpose of uh having an internal audit activity or internal auditor in general the second circle if you look at it has been divided into two components the darker component is the mandatory guidance and the lighter component is the implementation guidance the the mandatory guidance in itself has three is subdivided into four components um and the uh recommended guidance is divided into two components so what is the difference between mandatory and the recommended the mandatory one is the one by which every internal auditor or internal audit department has to be abide by so these are the standards which we have to follow um and not only standards but it also provides a code of ethics the code of be in the behavioral code for internal auditor whereas the second segment of the recommended guidance is basically you refer when you get into a confusion about any standards or if you need additional guidance so you can refer to those additional guidance just for your clarity and how to apply those standards so it is recommended so as by the name it goes you don't have to be mandatory applying those because it depends on your situation to situation however the the the mandatory guidance you have to follow in the mandatory guidance the four components which are the key critical components for internal auditor the first one is the core principles and then the definition of internal auditor standards is the third component and the last one is the code of ethics we will be discussing all these in a very high level but just to give you an understanding what are these individual components in the upcoming slides whereas in the recommended we have two uh kind of a documents one is implementation guidance and the other one is supplemental guidance that also we will be discussing in the upcoming videos so here is basically the same thing which i have explained to you so in the framework it basically has three main components the mission statement mandatory guidance which is subdivided into four more components and the recommended guidance which is divided into two more components so here we are uh with the uh with the definition of mission statement so basically mission is the purpose of why we exist or what is the role of internal audit um so basically it it gives you an overall idea of internal auditing uh the mission statement you one thing you will notice that the mission statement in audit definition are more uh are are more of a similar thing you know the same wording has been used because the internal audit definition is derived from the mission statement so that's why let's go to the definition first enhance and protect the organizational value by providing risk-based and objective assurance advice and insight so if you look at it's just a sentence or two but it it has so much meaning in in this mission statement and it give us so much of information first of all it it says that in the role of internal auditor is to enhance and protect the organizational value so what we we as an internal auditor is supposed to enhance and to protect the organization and its values it be it in any form be it in terms of governance be in terms of providing more value to the other stakeholders or whatever so we are the neutral auditor we have a very crucial role internally as an internal auditor within the organization while doing or performing that activity we we use certain tools so the tools which internal order is used is risk based so we can carry out our intel audit in multiple manners but why we use a recipes audit methodology is because we have scale resources limited time and we want to focus on the key risk of the organization that's how we'll be more valuable to the organization the other part of the definition is objective assurance so objective assurance is where we provide an independent assessment of an area and give us give our opinions that how that area of the business is performing so that is an objective assurance advice and insight these are part of our consulting assignments so basically where we are engaged as an advisor or as a consultant and the business wants an advice from us just to enhance the overall organizational governance level um in terms of maybe risk management in terms of better controls or any other purpose so this is the core definition of the mission statement of internal auditor for the exam purpose you should know all these definitions you don't have to memorize but at least you should be no in to to to distinguish just in case if there is any new thing which has been added in the options for you just to confuse so you should be knowing these uh so this is a basic uh tip for for the mcqs as well so the second component of the iiia mandatory guidance is the core principles so i will just quickly take you through the core uh principles what it states basically demonstrate in integrity so integrity is when we are being very honest uh as an auditor because our job is so sensitive that where we have to give our independent opinion uh on different reviews or assessments therefore uh we have to be an independent uh then uh demonstrate competence and due professional care so the internal auditor need to have skill knowledge and experiences of performing their duty in the best possible manner so we need because when we are assessing an area so we should be competent enough to give that advice to the board where they feel confident that whatever we are stating is is up to the mark so for that we need to have proper qualification we need to have a proper experience and knowledge and tools even the time we needed different kind of uh auditing i mean id tools that needs to be there and we should be capable of just in case of the internal auditor is not capable of anything so they can outsource those thing or they can they can leverage from other member within the team for those skills if they don't have the third point is is objective and free from undue influence so it is very important because internal auditor given uh an opinion on different processes and different functions of the organization so they should not be under the influence of any pressure by which that objectivity could be compromised align with the strategies objectives and risk of the organization because we want to add value to the organization is appropriately positioned and adequately resourced so there are two important elements the first element is that we have to be appropriately positioned that means that we should be reporting to the board functionally and administratively to the ceo because if we start functionally reporting to the ceo or or a member of the or a management person then it would be difficult for us to give an audit opinion on any area which that person is directly responsible and if there is like huge issues in that area for that reason we have to be independent of the management therefore we functionally report to the board however for administrative things for our um the thing which cannot impair our uh or compromise our work we can go to the ceo uh demonstrate quality and continuous improvement so we as an auditor this is our job to be more productive to the organization by which we have to increase our skill set communicate effectively very important provide risk-based assurance i have given you an a brief idea risk basis where we focus on the risk and high risk and basically give assurance or our opinion on the high risk issues is insightful proactive and future focus so this is where we do not only go for the previous issues or previous records we also have to find a way by which we can give not only previous matters opinion on the previous matter but also be proactive and future focus by looking at the risk which might encounter by the company promotes organizational improvement that is our overall objective that we should promote by our recommendation that the organization could be further enhanced and that's how we can add value so this is the core principles of internal audit this is just you need to keep in mind and um while performing your audio activities so you should know that what is being expected from you so here we are with the definition of internal audit uh let me go through and take you through from the um with explanation what is the definition of internal art and it is very important because you might come across mcqs related to the definition of internal audit sorry my voice is a little bit um unclear because i was sick so i was just trying to recover and just based on because of my commitment i'm trying to make this video so apologies if you found me a little bit shaky or uh not clear in my my voice um okay let's go quickly to the definition um an internal and independent intel audit is basically an independent objective assurance and consulting activity designed to add value and improve an organization operations so here you have to understand in the first line there is a lot of heavy terms which are being used first of all we need to be internal auditor needs to be independent which means that they should not be under any pressure from the management uh through any way be it in terms of providing not providing resources or not providing data or not allowing them to access to the company information so we needs to be independent secondly objective so if we are independent then only we will be able to give an objective uh assurance an objective opinion and consulting activity designed to add value so we can we are not only the one which always do an audit but we also provide some time as a the consultant advisory services to the organization to add value and improve organization operations so this is how the definition is being designed so there are two components assurance and consulting and there is one critical component that we need to be independent let's go to the second sentence it helps an organization accomplish its objective so by providing value we help the organization to accomplish its objective be it financial objectives be it other uh objectives um to be more contributing um organization to the society to help the stakeholders so these all objectives we help them to accomplish by being more risk-based auditor and applying and helping the organization in improving their organizational operations by bringing a systematic discipline approach to evaluate improve effectiveness of risk management control and governance process so how we are more systematic because we have internal audit manuals we have internal audit charters we have audit programs so everything is very designed in a perfect way and we go through a proper project management procedures this is how we ensure that we are we have a systematic discipline approach to evaluate and improve the organization risk management control and governance processes so this is the brief definition and i try to explain it to you to have a better understanding just a quick note and just in case if someone doesn't understand and just click my mind and what is allotted audit is basically the review of any company processes or information such kind of a thing or any activity to review any activity or observe any activity and given independent opinion whether these processes are being performed in the best possible manner without having a risk to the organization in terms of efficiency effectiveness and economy efficiency and effectiveness so this is how we give an assurance to the organization by giving our opinions but as at the same time we can also work as a consultant where we help them to improve certain controls so the internal audit standards are being divided into two components uh attribute standards and performance standards attribute standards all start from 1000 series and the performance standards start from 2000 series the app review and the attribute standards basically talks about the key attributes or characteristic of income audit whereas the performance standard basically help you to understand and to to guide you how to perform the internal audit activity so this is the main difference between attribute and performance standard here is the example of attribute standard for example 1000 is purpose authority and responsibility in details and give you a detailed explanation what is the purpose of internal audit uh what are our authorities and what are our responsibilities uh similarly we have 1100 again in 1000 series 1100 which talks about independence and objectivity in very much detail very in in detail manner then we have 1200 which is proficiency in due professional care which talks about that how we as an auditor has to improve ourselves in terms of competence by taking additional trainings by and having a subject matter expertise so this is how we have to keep on upgrading our skill sets then we have 1300 which talks about quality assurance and improvement program so which basically talks about that how we as an auditor improve our work our daily work and how we can ensure that our the work activity which are which we perform is up to the mark uh we have two ways of doing it first of all internally by through reviews our senior reviews our work and this is one way in the second way is we're independent um we hire an independent assessor which comes in assess the work of intel audit and given assurance that whether we are doing our job uh as of the quality which is being required by the iia and basically the gauge is the ipp of this whole standards and so if we are complying with the ippf framework then it means that we are doing our job in the best possible manner here we are with the performance standards so as i have told you that all the performance standards start with 2000 in series of 2000 so 2000 is managing the internal audit activity then we have 2100 which talks about the nature of of nature of our work be it assurance or consulting uh 2200 engagement planning then 2300 performing the engagement communication uh communicating result is 2400 then we have 2500 monitoring progress and the last one is 2600 communicating and acceptance of risk so this is if you look at in detail it talks from starting from how the nature of the work to the planning and performing and communicating our results it talks about all the practical uh daily work of internal audit that how we have to uh how to carry out our daily work and indeed and this standard is basically the performance standards help us a lot in in that manner so by taking all the guidance and all the um all the key matter of the standards while applying in our day-to-day audit activities so this is basically the key differentiation between attribute and performance standard and this in itself as a whole encompasses the all the uh internal rs standards which is being applied on internal auditors so you might be interested in knowing each and every standard because if i start explaining each and every standard it will be a very huge big presentation which i don't want to because i wanted to be more specific to the cia course uh therefore i'm skipping their part however these standards is not required to have the candidates are not required to have a very high level of understand i mean very detailed level of understanding of all these languages you need to have a high level of understanding however if you are still interested or just to have more knowledge about the standards you you can refer to a youtube channel uh which i highly recommend uh by the name of audit strategy it is all these videos in that channel has been um um done by tosif mushtaq he's a profound um head of artist chief audit executive so whatever he explains in this video it is coming from a huge experience and in different industries and sectors so he's just not an academic he is a professional by himself and a proven name in the industry so you can refer to his videos just in case if you want to have a detailed level of understanding on all these standards so uh this is the last component of the mandatory guidance which is a code of conduct basically code of conduct is the element or the code which we needs to encompass in our behavior as an internal auditor so it governs our behavior this is what you have to understand so it is being divided into two um further components the first one is the principle and the second is rule of conduct so if you look at the principle talks about integrity objectivity confidentiality and competence however the rule of conduct is also talking about the same thing however the difference is the principle gives you the broader guideline and the rule of conduct interpret those principles to help you to implement in your daily work so this is the difference so if you are interested you can go in detail however at a high level i will just give you an example that integrity is about being um honest objectivity is where you do not change your opinion due to any pressure or anything so you are very clear and without being biased you give your opinion confidentiality being as an auditor you have access to the information so you have to ensure that this information is being uh you you responsibly use it and communicate it and and in store as well competence is where you as an auditor needs to be qualified or you need to keep on upgrading your skills you need to have that that level of proficiency and competence in in yourself that when you review an area your words and your recommendation should be of value to the organization so it is also very much important however what are the key nitty gritty details of these each element this is being uh explain it to you in the rule of conduct here we are with the recommended guidance so this is a the unhighlighted section of the graph and then i mean the picture which i i've shown you in the previous slide uh recommended guidance uh basically it is divided into two things one is implementation guidance and the second is supplementation guidance so the implementation guidance is basically to it it helps you to apply the standards and supplemented guidance give you a detailed procedures how to apply that so first of all what you do as an auditor if you stuck in any issue you go for the standard if you need further more elaboration you go to implementation guidance and if you need a detailed level of procedure and if it is available then you go to the supplementation or um this practice guide previously it used to indeed the name of supplementation guidance was practice guidance so you go into this document just to see that how you can apply okay now we have done with the ippf framework we closed that chapter and within the unit one we have one additional topic which talks about the charters the charter so before going into what the standard says and what is the charter i just want to give you a brief elaboration between uh there are two types of charters so one is internal audit charter and the other one is audit committee charter so you should not confuse between um the two the first one audit committee charter is basically the charter which gives a detailed level of understanding to the to the governing body that what the audit committee will be doing so the audit committee is basically comprises of the board members the board member just to um because the board is is having a lot of agenda so they cannot focus on every issue of the organizations therefore uh at the best corporate governance practice they they assigned certain member of the board to become part of the audit committee and these audit committee have a charter which govern the how they will carry out their work activities and what are the roles and responsibilities and uh how many time of the year they will be sitting so this is all part of the audit committee charter and then there is another charter we call it internal audit charter which is one level below that so in internal audit charter the role and responsibility of the internal auditor are being defined and there are some other elements that are being part of the intel audit charter so the audit committee charter is being approved by the board and the internal audit charter is being generally approved by the [Music] audit committee just in case if you are working in an organization where there is no audit committee and you directly report to the board then in that case your audit committee charter is is being approved by the board so this is the approval mechanism for uh for internal audit charter the standard 1000 basically state about the internal audit charter what it says it's a formal document that defines the internal audit purpose authority and responsibility so this is basically the in nutshell what the infinity charter is uh all about however there are key critical components that need to be part of the uh internal audit charter the first thing is internal audit objectives and responsibility the second thing is the nature of work of intel audit which comprises of assurance services and consulting services the third is the chief audit executive reporting which is administrative reporting uh to the ceo and functional reporting to the board or audit committee the uh the another uh key element is the level of authority where we state that the internal audit should have a free access unrestricted access to records property and personnel obviously when we have access to all this information we also have the responsibility to ensure confidentiality and to behave ethically so that is just to uh counter uh with this authority the responsibility is being defined so this is a brief nutshell of what the internal audit charter is comprises of whenever we form an intel audit charter we discuss with the management and then we take it to the audit committee the reason why we also discuss with the management because they should also need to know what is the role and responsibility of internal auditor is and in your in your daily work this document will work phenomenally because tomorrow if you have any conflict or just in case if you are not getting any information or the management is asking to do something which contradicts your role and responsibility defined in the charter then you refer them to the audit committee charter because it is being approved by by the board or the board member in terms of an audit committee so it is a very powerful document and it is there to safeguard you and it is also there to to communicate the role and responsibility of internal auditor across the organization so this is uh one important element uh one one important concepts which has been uh put it forward in the unit one so this is in in brief nutshell the entire um syllabus of unit one there might be some nitty gritty details to each uh topic but i try to explain it to you all the key topics so you don't have a confusion in understanding what is the mandatory guidance or other things so um just for the sake of this presentation i try to keep it very simple and straightforward and hope it will benefit you and in the next video i will try to cover the entire unit two key concepts thank you for watching and do subscribe if you are benefiting from it and also share with other colleagues who might be interested in cia course and who need an additional resources or guidance to to pass this exam take care and see you in the next video you