Fundamentals of the Discipline of Internal Auditing

Before research can be conducted in the discipline of Internal Auditing, it is important that you have a sound understanding about the fundamentals of the discipline. A rule of thumb is Albert Einstein's saying: "If you cannot explain it simply, you do not understand it well enough". As postgraduate student, you are to become an expert on a topic within the field of Internal Auditing ... for this reason, I regard it as a non-negotiable for all Internal Auditing postgraduate students to understand the following key terms and context related to Internal Auditing:

> Definition of Internal Auditing
> The history of internal auditing
> The IPPF Framework
> Core principles of Internal Auditing
> Code of Ethics
> International Standards

Definition of Internal Auditing

According to the Institute of Internal Auditors, the discipline of Internal Auditing is defined as follows:

"The independent, objective, assurance and consulting activity designed to add value and improve an organisations objectives. It helps an organisation achieve its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes".

Though lengthy, the italic keywords in the definition makes more sense when it is dissected:

Independent: To be self-standing (not reliant to perform tasks).
Objective: To be fair and impartial with no bias.
Assurance: To give peace of mind (there, there, there).
Consulting: To advise and recommend (for improvement).
Add value: To make something more desirable.
Achieve its objectives: Economic, environmental and social objectives.
Systematic: According to a system (see IPPF framework).
Disciplined: In a controlled manner (see International Standards).
Evaluate: To determine / assess something.
Improve: To make something better.
Effectiveness: The extent to which something is working as it should.
Risk management: Management of unplanned events.
Control: To have influence over events.
Governance: The manner how leadership leads.

With the above in mind, it is possible to deduce that an Internal Auditor is a person who can be seen as a "business doctor" to go out of his/her way to add value to a business. The manner in which value is added is to be self-standing and fair when providing assurance and/or consultation surrounding the achievement of a business' objectives. This, in turn, is performed by following a logical system with processes to determine the effectiveness and, where possible, improve the effectiveness, of risk management, control and governance processes.

More can be read here.

The history of internal auditing

Internal Auditing is a very recent profession that was formally recognised for the first time in 1941. Since its recognition, it has undergone significant changes and, to date, the profession is still evolving.

For more information, read "The very detailed theoretical and historical overview of Internal Auditing ... without the boredom"

THE IPPF Framework

The IPPF Framework provides holistic guidance to Internal Auditors surrounding the actual performing of Internal Auditing. This framework - last updated in 2015 -speaks to mandatory guidance (guidance which must be followed by Internal Auditors globally) and recommended guidance (guidance which can be followed by Internal Auditors globally).

Mandatory guidance
This includes the core principles of Internal Auditing, the definition of internal auditing (see above), the International Standards, as well as he Code of Ethics.

Recommended guidance
This includes implementation guidance and supplemental guidance.

More can be read here.

Core principles of internal auditing

The core principles of Internal Auditors speak to the most important characteristics that Internal Auditors should possess when performing Internal Auditing. Though these characteristics may vary from organisation to organisation, the following ones are important:

> Demonstrates integrity.
> Demonstrates competence and due professional care.
> Is objective and free from undue influence (independent).
> Aligns with strategies, objectives and risks of the organisation.
> Is appropriately positioned and adequately resourced.
> Demonstrates quality and continuous improvement.
> Communicates effectively.
> Provides risk-based assurance.
> Is insightful, proactive, and future-focused.
> Promotes organisational improvement.

More can be read here.

Code of ethics

The code of ethics speaks to "the way of life" for an Internal Auditor. In essence, the code of ethics speaks to ethical conduct that has to be followed by Internal Auditors or any person associated with the discipline of Internal Auditing. The four core principles in the code of ethics are as follows:

Integrity
Speaks to the trustworthiness of Internal Auditors when performing Internal Auditing.

Objectivity
Speaks to the fairness of Internal Auditors when performing Internal Auditing.

Confidentiality
Speaks to the respect of information Internal Auditors receive when performing Internal Auditing.

Competency

Speaks to the knowelge, skills and experience required by Internal Auditors when performing Internal Auditing.

More can be read here.

International Standards For the professional practice of internal auditing (International Standards)

When performing Internal Auditing, it is important for Internal Auditors to perform their duties in accordance with the International Standards for the Professional Practice of Internal Auditing (often referred to as International Standards). These Standards are categorised into the following two groups, namely Attribute standards and Performance standards.

Attribute standards (known as the 1 000 Standard series)
Guidelines on how Internal Auditors should behave when performing an Internal Audit. For more information, click here.

Performance standards (known as the 2 000 Standard series)
Guidelines on how Internal Auditors should perform their duties when performing an Internal Audit. For more information, click here.

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