Internal Auditing Assurance and Advisory Services 3 rd Edition 2013 by The

Internal auditing assurance and advisory services 3

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Internal Auditing: Assurance and Advisory Services, 3rdEdition. © 2013 by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue, Altamonte Springs, FL 32701 USA IS2-9CHAPTER 2THE INTERNATIONAL PROFESSIONAL PRACTICES FRAMEWORK: AUTHORITATIVE GUIDANCE FOR THE INTERNAL AUDIT PROFESSIONIllustrative SolutionsCasesCase 1According to The IIA’s Standardsand Code of Ethics, Mr. Eatough should report this situation to the audit committee. Standards 2060 and 2600 are directly pertinent.Standard 2060: Reporting to Senior Management and the Board“The chief audit executive must report periodically to senior management and the board on the internal audit activity’s purpose, authority, responsibility, and performance relative to its plan. Reporting must also include significant risk exposures and control issues, including fraud risks, governance issues, and other matters needed or requested by senior management and the board.”Standard 2600: Resolution of Senior Management’s Acceptance of Risks“When the chief audit executive believes that senior management has accepted a level of residual risk that may be unacceptable to the organization, the chief audit executive must discuss the matter with senior management. If the decision regarding residual risk is not resolved, the chief audit executive must report the matter to the board for resolution.”Other applicable standards include:Standard 1110.A1: “The internal audit activity must be free from interference in determining the scope of internal auditing, performing work, and communicating results.”Standard 2440: Disseminating Results“The chief audit executive must communicate results to the appropriate parties.”Applicable Code of Ethics rules include:“1.2Shall observe the law and make disclosures expected by the law and the profession.”“1.3Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organization.”“2.3Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.”Mr. Eatough fulfilled his professional obligation if he complied with the Standardsand the Code of Ethics. Mr. Eatough did in fact properly report this situation to the audit committee. He was fired and sued for wrongful dismissal. The lawsuit was subsequently settled.Case 2A.Three relevant Code of Ethics rules:“1.1Shall perform their work with honesty, diligence, and responsibility.”“1.2Shall observe the law and make disclosures expected by the law and the profession.”“2.3Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.”
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Internal Auditing: Assurance and Advisory Services, 3rdEdition. © 2013 by The Institute of Internal Auditors Research Foundation, 247 Maitland Avenue, Altamonte Springs, FL 32701 USA IS2-10CHAPTER 2THE INTERNATIONAL PROFESSIONAL PRACTICES FRAMEWORK: AUTHORITATIVE GUIDANCE FOR THE
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