2. Central Piedmont Community College Internal Audit

3. 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. The Institute of Internal Auditors

4. Internal Audit Mission The mission of Internal Audit is to assist all levels of administration in the achievement of the College goals and objectives by striving to provide both quality customer service and a positive impact on the efficiency and effectiveness of administrative functions. The Office achieves this impact by providing ongoing, objective, and independent reviews of internal controls and independent appraisals (i.e. audits), analyses, and counsel related to the assessment of business risk.

5. Services Provided  General Audits Financial Compliance Operational  Special Investigations  Consulting

6. Audit Activities (Selected)  Determine the accuracy and validity of financial transactions  Evaluate the financial and operational procedures for adequacy and effectiveness of internal controls  Verify the existence of College assets and ensure that assets are adequately safeguarded against loss  Evaluate the adequacy related to information relied on during management’s decision-making

7. Internal Control Components  Monitoring  Control Environment  Risk Assessment  Control Activities  Information & Communication

8. Monitoring includes the following: Internal Control Components: Monitoring  Supervising  Observing  Testing  Reporting to Responsible Individuals

9. Internal Control Components: Monitoring Activities Include  Evaluation of Trends  Reviews of Outstanding Encumbrances  Surprise Cash and Asset Counts  Follow-up on complaints  Review of Financial Reports  Spot Checking of transactions to ensure compliance with policies and procedures

10. Internal Control Components: Risk Assessment … Is the identification and analysis of relevant risks associated with the achievement of objectives Is an ongoing process that is a critical component of an effective internal control system

11. Internal Control Component: Risk Assessment  Risk can pertain to external & internal factors  External risk factors are outside of the College, usually beyond management’s span of control  Internal risk factors are within the College, usually within management’s control

12.  Economic changes  Changing student & community needs  New/changed legislation & regulations  Technological developments  Natural catastrophes  Competitive conditions Risk Assessment External Risk Factors

13.  New Personnel  Low Morale  Competency & Integrity of Personnel  New or Revamped Information Systems  Size of Organization  Complexity & Volatility of Activities  Geographical Dispersion of Operations  Changes in Management Responsibilities Risk Assessment Internal Risk Factors

14. After the risk factors have been identified, they must be evaluated or analyzed in terms of risk and the associated levels Risk Assessment Risk Analysis

15.  What can go wrong  What areas have the most risk  What assets are at risk  Who is in a position of risk Risk Assessment Risk Analysis Administrators must determine …

16. Control activities are the policies and procedures that help ensure that management directives are carried out Addressing Identified Risk: Control Activities

17. Examples of Control Activities  Authorizations  Segregation of Duties  Recording  Safeguarding  Reconciliations

18. Internal Control As Defined by COSO Is … (Committee of Sponsoring Organizations) A process, affected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Reliability of financial reporting; Effectiveness and efficiency of operations; and Compliance with applicable laws and regulations

19. Internal Control Is …  A Process … Not Merely Policies, Procedures and Forms  Affected by People  Directed Toward the Achievement of Objectives

20. Internal Control Primary Objectives  Compliance  Accomplishment of Goals & Objectives  Reliability & Integrity of Information  Economical & Efficient Use of Resources  Safeguarding of Assets

21. Perfect Internal Control? There is no such thing as a perfect internal control system … there are inherent limitations, which typically cannot be controlled

22. Perfect Internal Control? Inherent Limitations  Misunderstanding of Instructions  Mistakes of Judgment  Personal Carelessness  Distraction  Fatigue  Management Override  Staff Size Limitations  Collusion Among Individuals

23.  Everyone has a role in regard to internal controls Internal Controls Responsibility For …  Roles will vary depending on level of responsibility and the nature of involvement by the individual

24. Internal Controls Responsibility For …  A weak link in the organizational structure can create a weakness in the control system

25. Internal Controls Responsibility Administrator Level Administrator is responsible for: Executing major institutional policies and procedures Designing and implementing control systems

26. Internal Controls Responsibility President’s Cabinet The President’s Cabinet is responsible for: Providing leadership and guidance Providing direction and oversight to senior administrators Establishing a presence of  Integrity  Ethics  Competence  Positive Control Environment

27. Internal Controls Responsibility Individual Each individual is responsible for being cognizant of proper internal control procedures related to their job.

28. Internal auditors are responsible for: Examining the adequacy and effectiveness of the College ’ s internal controls, Making recommendations where control improvements are needed Contributing to the effectiveness of the control environment Internal Controls Responsibility Internal Auditors

29.  Internal auditors are a part of the internal control system, not the whole system  They are not responsible for establishing or maintaining them Internal Controls … And Internal Auditors

30. Internal Controls … And Internal Auditing Internal Auditing helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of … Risk management Control Governance Processes

31. Benefits of Internal Audit  Pragmatic, business oriented advice  Local knowledge of policies, procedures, culture and environment  Conduit to other resources

32. Any Questions Prepared By: Brenda M. Leonard, C.B.M., Ed.D. (brenda.leonard@cpcc.edu)brenda.leonard@cpcc.edu Janice Hill (janice.hill@cpcc.edu)janice.hill@cpcc.edu For additional information visit the Internal Audit website @ http://inside.cpcc.edu/audit/default.htmhttp://inside.cpcc.edu/audit/default.htm