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1 The Path to Quality... a step-by-step guide to world-class internal auditing

2 What is quality? Exceeding stakeholder expectations. Ensuring value is added to all areas of the IAA and the IAA adds value to the Organization. Competency and Proficiency to the Organizations risk management, controls and governance processes.

3 Achieving Quality Can Be Impacted By: Organizations –Acceptance Goals/Objectives –Mission Tenaciousness –Temperament / Appetite Chief Audit Executives professionalism, commitment and diligence The Quality Assurance and Improvement Program (QAIP) Audit Staffs Commitment Audit Customers Understanding

4 Maturity Model Levels to Quality Level 1: Introductory Level 2: Emerging Level 3: Established Level 4: Progressive Level 5: Advanced

5 Level 1 Introductory Maturity Fairly new shop or new CAE adopting the IIA Standards Organization lacks understanding of importance Senior Management/Board dont understanding value IAA has not established a QAIP Not complying with requirements

6 Level 1 Key Messages Have not adopted quality in IAA Might be a new internal audit shops or new CAE Need to assess and to document Understand the Standards Critical to begin a QAIP

7 Steps to Introductory Quality 1.Adopt the definition 2.Achieve appropriate reporting structure 3.Commit to quality through the audit Charter 4.Acquire managements buy-in 5.Educate the audit committee

8 Definition of Internal Auditing Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's 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.

9 What should be the reporting lines for the chief audit executive? To ensure transparency and thwart collusion and conflicts of interests, best practice indicates that the internal audit activity should have a dual reporting relationship. The CAE should report to executive management for assistance in establishing direction, support, and administrative interface; and to the organization's most senior oversight group typically, the audit committee for strategic direction, reinforcement, and accountability.

10 Level 2 Emerging Maturity The QAIP must include periodic and ongoing self-assessments Compliance monitoring with the Standards is in place Annual presentation of self assessment results is complete to senior management and Audit Committee

11 Level 2 Key Messages Ongoing monitoring of Standards/Ethics Self Assessment determines strength & weaknesses IAA has found whats working, whats not working Report results of self assessments Maintain documentation and detailed plans for improvement IAA completes presentation of results annually

12 Steps to Emerging Quality 1.IAA gets involved with The IIA and local chapter 2.CAE works toward certification 3.CAE attends QA Self Assessment training and/or seminar 4.Assign monitoring responsibilities 5.Use the Self-Assessment Checklist 6.Obtain feedback from others

13 Level 3 Established Maturity Annually obtain internal independent validation of IAA ongoing self-assessment CAE, Senior Management & Audit Committee support and involved in Quality Assessment process Committed to obtaining an external independent validation every five years.

14 Level 3 Key Messages CAE is committed to Professionalism and Quality of IAA Audit committee directly involved Rigorous IAA self assessment reviewed and tested Peer review performed with qualified participants

15 Steps to Established Quality 1.IAA staff certifications demonstrate IAA professionalism and competency 2.IAA uses Balanced Scorecard 3.Requires proper qualifications for validator 4.Develops plan for improvements and establishes timeline for implementation 5.Report QA validation to The IIA Quality

16 List here. Balanced Scorecard for Internal Auditing Board/Audit Committee OBJECTIVES MEASURES List here. Management/Audit Customers OBJECTIVES MEASURES List here. List here Innovation/Capabilities OBJECTIVES MEASURES List here. Internal Audit Processes OBJECTIVES MEASURES List here. INTERNAL AUDIT STRATEGY CORPORATE STRATEGY Experience Education Training Certification Reporting Relationships Expectations Perspective on IA Roles Satisfaction Surveys Requests Complaints Importance Levels Improvements Findings Repeat Findings Savings Quality Assessment Perspective on IA Roles Satisfaction Surveys Risk Concerns CAE/AC Private Meetings

17 Level 4 Progressive Maturity QAIP is now a well developed, defined and documented program IAA is well recognized within the organization as value added IAA has an External QA conducted every five years

18 Level 4 Key Messages IIA has an established mindset for professionalism and demonstrates it in their activities Audit committee, management and staff all support commitment to Quality Stakeholder confidence is high because of quality and successful & leading practices IAA is in compliance with Standards & Ethics

19 Steps to Progressive Quality 1.CAE has CIA certification 2.Any gaps have been addressed and action plans are in place 3.Follow best & leading practices 4.A qualified external QA provider is used 5.Report completion of external QA to The IIA

20 Level 5 Advanced Maturity IAA has a active and fully integrated Quality Assurance & Improvement Program External QAR are performed every three years All IAA staff have certification and rigorous continuing education

21 Level 5 Key Messages IAA raises the bar for professionalism Respect by Organization and board Chief Audit Executive is a respected member of executive management IAA shows an unrelenting commitment to growth, development, and improvement Exemplary audit committee

22 Steps to Advanced Maturity 1.IAA maintains an appropriate mix of professional designations 2.IAA is a benchmark for progress to others in and out of their industry 3.IAA share tools and success story 4.Serve on QA review teams 5.Mentor, speak, research, and write for the profession of Internal Auditing

23 The Path to Quality Add value Be perceived as adding value Ensure the value you add in the future

24 This Path to Quality presentation was developed by The Institute of Internal Auditors (IIA) Global Headquarters.

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