Internal auditing departments are led by a chief audit executive ("CAE") who generally reports to the audit committee of the board of directors, with administrative reporting to the chief executive officer (In the United States this reporting relationship is required by law for publicly traded companies).
Internal auditing departments are led by a chief audit executive ("CAE") who generally reports to the audit committee of the board of directors, with administrative reporting to the chief executive officer (In the United States this reporting relationship is required by law for publicly traded companies).
The most comprehensive definition of internal audit is given by the IIA, USA. It is,
"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 purpose of the presentation is to provide clarification for a better understanding of what internal audit definition, objectives, functions, stages and reporting are all about? What difference does it make in the presence of an external audit? How different is its scope from that of the external audit? How internal audit standards contribute to better performance of internal audit work and its reporting to the Board or Audit Committee?
Internal Audit is a tool of control to measure and evaluate the effectiveness of the working of an organization primarily with accounting, financial and operational matters.
Internal Audit plays a constructive role by rendering service to the management with objective appraisal of systems, procedures, practices, compliance with policies.
LetzConsult presents a smarter ways for companies to find the most relevant Consultant for their business needs. Find the right consultants for your Company on LetzConsult.com
Resume : "Internal audit quality : developing a quality assurance and improve...asvary asvary
This book will assist chief audit executives and internal auditors to develop a quality assurance and improvement program and embed processes that enhance the quality of their internal audit function. The book looks at what constitutes quality, and how a greater understanding of quality drivers can lead to more valuable internal audit practices. Most internal auditors understand quality and performance. Good internal audit practice benchmarks organizational areas and activities against commonly accepted criteria. This book provides similar criteria for internal audit functions to benchmark themselves against
The most comprehensive definition of internal audit is given by the IIA, USA. It is,
"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 purpose of the presentation is to provide clarification for a better understanding of what internal audit definition, objectives, functions, stages and reporting are all about? What difference does it make in the presence of an external audit? How different is its scope from that of the external audit? How internal audit standards contribute to better performance of internal audit work and its reporting to the Board or Audit Committee?
Internal Audit is a tool of control to measure and evaluate the effectiveness of the working of an organization primarily with accounting, financial and operational matters.
Internal Audit plays a constructive role by rendering service to the management with objective appraisal of systems, procedures, practices, compliance with policies.
LetzConsult presents a smarter ways for companies to find the most relevant Consultant for their business needs. Find the right consultants for your Company on LetzConsult.com
Resume : "Internal audit quality : developing a quality assurance and improve...asvary asvary
This book will assist chief audit executives and internal auditors to develop a quality assurance and improvement program and embed processes that enhance the quality of their internal audit function. The book looks at what constitutes quality, and how a greater understanding of quality drivers can lead to more valuable internal audit practices. Most internal auditors understand quality and performance. Good internal audit practice benchmarks organizational areas and activities against commonly accepted criteria. This book provides similar criteria for internal audit functions to benchmark themselves against
This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/audit-report-model-and-sample-268
This document "Audit Report: Model and Sample" contains a model of an audit report and a real sample from an IT Audit assignment (data of client not disclosed for privacy and confidentiality issues).
This has been used effectively in various types of internal and external audit assignments as well as consulting assignments, especially in reviewing internal controls for all types of companies.
2018 ValAct - Session 22 - Material WeaknessMarkSpong1
Recent high profile material weakness disclosures have left some wondering: who’s next? The session will provide background on the causes and impacts of the material weakness and then focus on effective controls on financial reporting. We’ll spend most of the time discussing case study scenarios of common pitfalls when developing controls.
At the conclusion of the session, attendees will be able to:
• Identify the common causes of significant deficiency and material weakness audit opinions;
• Evaluate the impact of a material weakness assessment on audit fees and other financials; and
• Develop a plan to prevent or remediate a material weakness assessment.
2018 Val Act: Session 22 - Material weaknessAlex Hovi
Avoiding the material weakness: Case studies in developing effective controls.
Originally presented by Melanie Dunn and Mark Spong at the 2018 Valuation Actuary Symposium.
Hanrick Curran Audit Training - Internal Controls - March 2013Matthew Green
Training delivered to assisting audit staff as part of their continuing professional development/education (CPE/CPD). Provided in a 60 minute session with substantial discussion and interaction.
Internal Control Certification – It’s Not Just an Accounting Thing (Credit Un...NAFCU Services Corporation
In this recorded 2012 NAFCU Technology & Security Conference session, you will learn about the internal control certification process and how it impacts more than just the accounting department. Discover the importance of becoming internal control certified, gain insight on the impact of recent regulation change from SAS70 to SSAE 16, and get a walkthrough of the process and audit reports (Type I & Type II) as well as discuss the involvement from the “technology side of the house,” including documentation of systems controls, disaster recovery and more!
Presented by Jeff Ziliani, CPA, Director of Finance and Administration, Burns-Fazzi, Brock
Burns-Fazzi, Brock is the NAFCU Services Preferred Partner for Executive Benefits and Compensation Consulting and Long Term Care Insurance.
More information at http://www.nafcu.org/bfb
Chapter 9Audit Risk AssessmentPrepared by Dr Phil Saj1.docxmccormicknadine86
Chapter 9
Audit Risk Assessment
Prepared by Dr Phil Saj
1
Learning objectives
Appreciate the importance of audit risk assessment and why it is linked to financial statement assertions.
Explain the importance of business risks in audit planning.
Describe the procedures performed by an auditor to assess risk.
Appreciate the importance of internal control to an entity and to its independent auditors.
2
Learning objectives
Indicate the procedures for obtaining and documenting an understanding of the entity’s internal control.
Explain why and how a preliminary assessment of control risk is made.
Explain the importance of the concept of audit risk and its three components.
3
Management’s financial statement assertions
Existence or occurrence
Assets or liabilities of the entity exist at a given date and whether recorded transactions or events have occurred during the period.
Completeness
Transactions, events and accounts that should be presented in the financial statement are included.
Cut-off
All transactions, events and accounts have been recorded in the correct period.
4
Management’s financial statement assertions
Rights and obligations
Assets represent rights of the entity and liabilities
are the obligations of the entity at a given date.
Valuation and allocation
Asset, liability, components have been included in the
financial statements at the appropriate amounts.
Accuracy
Transactions have been appropriately recorded
in the proper accounts.
5
Management’s financial statement assertions
Presentation and disclosure
Particular components of the financial statements are
properly classified, described and disclosed.
Refer to the textbook Table 9.1, page 363, for illustrations of each of these assertions.
6
Business risk assessment
A business risk approach allows the auditor to:
Identify threats faced by the organisation.
Recognises that most business risks will eventually
have an effect on the financial statements.
Increase the chances of identifying risks of material
misstatements in the financial reports
Categories of business risk:
Financial risk
Operational risk
Compliance risk
7
Risk assessment procedures
Enquiries
Management, staff, internal auditors, company bankers,
legal advisors.
Analytical procedures
Provide a broad indication of the likelihood of possible
errors.
Observations and inspections
Inspection of manuals, visiting business premises,
observing procedures taking place.
8
Importance of internal control
The Committee of Sponsoring Organisations (COSO) of
the Treadway Commission defines internal control as:
a process, effected 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:
Effectiveness and efficiency of ...
Identifying, understanding and evaluating an organization’s most significant risk areas will set the foundation for a robust enterprise risk management (ERM) program. This sample guide outlines an effective and proven approach to building ERM capabilities that will ultimately enhance corporate governance, align and integrate varying views of risk and risk management, and respond to the changing business environment.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the what'sapp number of my personal pi merchant who i trade pi with.
Message: +12349014282 VIA Whatsapp.
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just what'sapp this number below. I sold about 3000 pi coins to him and he paid me immediately.
+12349014282
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the what'sapp contact of my personal pi vendor
+12349014282
4. 4
AUDIT RATINGS GUIDE: SAMPLE 1
(Insert Year) Remote Access Audit Month XX, (Insert Year)
(Audit Name) (Insert Date)
Instructions: Circle the audit rating determined through the completion of the audit rating grid on Page 4.
GOOD
Areas given a “Good” rating are well-controlled in every respect and demonstrate quality performance in almost
every aspect. Performance is above average and adequately provides for the safe and sound operation of the
area audited. Findings noted are minor; are not indicative of any significant weaknesses in policies, practices or
procedures; and are generally corrected in the normal course of business.
SATISFACTORY
Areas given a “Satisfactory” opinion have acceptable internal controls and demonstrate adequate performance in
most respects. Policies, practices and procedures are generally effective but may reflect modest weaknesses that
are readily correctable in the normal course of business. Commitment to internal control and operating efficiency
are acceptable. Some problems of relative significance may exist, but none are considered material.
REQUIRES IMPROVEMENT
Areas given a “Requires Improvement” opinion exhibit weaknesses within the internal control systems or the
absence of internal control surrounding significant activities. Additionally, these areas demonstrate performance
that is not adequately monitored and/or supervised by management, nor are policies and procedures always
effective to promote a climate where internal control concepts may be realized. Commitment to internal control
and/or operating efficiency needs enhancement.
UNSATISFACTORY
Areas given an “Unsatisfactory” opinion display performance or conditions that exhibit significant control
weaknesses throughout the areas included in the audit scope. In these areas, many basic internal control
concepts are not in effect and internal control systems are weak to the extent that significant financial losses or
violations of law or regulation could occur or may have occurred. The lack of policies and procedures or
adherence to them will prevent the accomplishment of a substantial part of the area’s objectives. Corrective action
must be immediately implemented with periodic (e.g., monthly) status reports routed to the area’s executive
management.
CONCURRENCE/NONCONCURRENCE
This rating applies to systems development and business or control projects in the process. It conveys
agreement/disagreement with a course of action or documents an opposing point of view. In each case, the report
will state whether audit believes the project should be aborted, or what actions should be taken prior to
commencing the next phase.
NOT RATED
The conditions or purposes of the audit do not require a rating to be assigned.
AUDIT RATING STANDARDS
5. 5
Instructions: Circle the point value assigned to each area. Multiply the point value by the factor for the applicable
area and write the value in the applicable column under “Score” and by the letter for the particular column. Add
the total points for each area across to obtain the overall point value. Use the overall point value to assign the
rating.
Internal Controls Operations Accounting Records
Factor Five
(From Page Three)
Factor Three
(From Page Four)
Factor Two
(From Page Five)
Points Score Points Score Points Score
5 5 5
4 4 4
3 3 3
2 2 2
1 1 1
Total A20 Total B12 Total C
Total Score: XX
Check the appropriate rating based on the total score.
Good 50-39 points
Satisfactory 38-25 points
Requires Improvement 24-15 points
Unsatisfactory 14 and below
Additional rating factors for audits to be rated “Good” include:
• Major system changes or upgrades during the audit period
• Significant changes in personnel during the audit period
• Significant new products or services introduced during the audit period
• Uncorrected internal/external audit or examination findings
• Unaccepted internal audit recommendations
AUDIT RATING GRID
RATING SCALE
6. 6
INTERNAL CONTROLS
Rating summary of internal control structure:
• 5: Virtually all desired controls are in place and operating. Only very minor exceptions were noted, and backup
controls exist for all weaknesses noted.
• 4: Most material controls are in operation and the exposures found are minor in extent and nature. They are
usually backed up by other controls.
• 3: Attention should be given to some exposures in protective and detective controls. Reasonable assurance
exists that current controls afford the bank adequate protection.
• 2: Early attention should be given to exposures in protective and detective controls. Deterioration in current
controls can lead to serious exposures.
• 1: Immediate attention to serious exposures in protective and detective controls is required. Exposures exist
that could make the bank vulnerable to significant losses.
Support for rating of internal control structure: (List)
All of management’s controls were sufficiently designed to mitigate risks and achieve control objectives related to
remote access. Additionally, all of management’s controls were tested for operating effectively to mitigate the
intended risks and achieve the intended control objectives.
OPERATIONS
Prepare the following rating based on audit evidence.
Rating Summary of Operations
5 Performance is significantly higher than average.
4 Performance is above average.
3 Performance is average.
2 Performance is below average.
1 Performance is unacceptable.
Support for rating of operations: (List)
Internal audit’s testing revealed that management possessed documented policies and procedures in all relevant
and significant areas related to remote access (specifically the remote administration of IT systems, encryption
and passwords).
Through discussions with IT management and a walk-through of the controls, internal audit also determined that
IT management personnel responsible for performing or monitoring the controls were knowledgeable of the
controls and had many years of experience in working in their related fields.
Internal audit identified the following opportunities to further enhance and improve existing controls, but these
improvements did not constitute control failures because of numerous compensating controls that adequately
reduce risk to the bank.
• IT management should reassess the need for the modem remote access system.
COMPOSITE RATING AREAS
7. 7
• Management should update its remote administration of IT’s systems policy and annual privileged account
review procedure to require the annual review of all accounts with access to perform remote administration of
IT systems.
See VIII. Remote Access Recommendation Memo.doc for additional information regarding these
recommendations.
ACCOUNTING RECORDS
Rating Summary of Operations
5 The books and records more than adequately and accurately reflect transactions.
4 The books and records adequately and accurately reflect transactions.
3 The books and records, in reasonable detail, accurately reflect transactions.
2 The books and records less than adequately reflect transactions.
1 The books and records do not accurately reflect transactions.
Support for the rating of accounting records: (List)
There are no financial books or records applicable to the remote access audit. There are some IT records
applicable to the audit and they include remote access activity reports and IT service requests. Remote access
activity reports are used by management to monitor who is using the remote access system and to detect any
inappropriate use of the remote access system. IT service requests record the approval and testing of any
changes to remote access systems (including system and access changes). Internal audit noted that these IT
records adequately and accurately reflect system and access changes related to remote access.
8. 8
AUDIT RATINGS GUIDE: SAMPLE 2
AUDIT RATING DEFINITIONS
Rating Definition
Strong
Internal control systems are sufficiently comprehensive and appropriate to the size and
complexity of the organization. Risks are effectively managed. Monetary risk
associated with potential control failures is not material. A few exceptions to
established policies and procedures were identified.
Satisfactory
While there may be some minor risk management weaknesses, these issues have
been recognized and are being addressed. Risks are effectively managed. Internal
control systems may display modest weaknesses or deficiencies, but they are
correctable in the normal course of business.
Needs Improvement
Risk management practices are lacking in important ways and are a cause for more
than supervisory attention. Risks may not be effectively managed. Weaknesses may
include control exceptions or failures that could have adverse effects on the
organization if corrective actions are not taken.
Needs Significant
Improvement
Marginal risk management practices generally fail to identify, monitor and control
significant risk exposures in many material respects. The organization may have
serious identified weaknesses that require substantial improvement in internal controls
or procedures. Risks are not effectively managed. Unless properly addressed, these
conditions may result in a significant impact on the organization.
Unsatisfactory
Due to the absence of effective risk management practices, management is unable to
identify, monitor or control significant risk exposure. Internal control systems may be
sufficiently weak to jeopardize the continued viability of the organization. Risks are not
effectively managed. Deficiencies in risk management procedures and internal controls
require immediate and close supervisory attention.
AUDIT REPORT RATING MATRIX
Rating Scale Definition
Effective
1
• Overall risk program is reliable and requires negligible improvements.
• The risk management procedures are formalized and documented and
communicated and understood throughout the business. Risk
management system is robust and possesses the capacity and ability to
consistently identify, document and assess existing and emerging risks.
• Risk controls effectively manage, mitigate, and transfer existing and
foreseeable risks and do not expose the business to undue risk. Risk
program does not expose the business to unwarranted financial loss or
regulatory noncompliance. Audit recommendations are generally
housekeeping in nature.
2
9. 9
Rating Scale Definition
Monitor
3
• Overall risk program is adequate for the current level of risk within the
business but requires ongoing monitoring.
• The risk management procedures are formalized and documented but
not communicated. Risk procedures need to be communicated and
business needs to obtain assurance that procedures are understood.
Although the risk management system possesses the capacity and
ability to identify, document and assess existing risk, specific
improvements are needed to ensure accurate and timely incorporation
of emerging risks.
• Risk controls adequately manage, mitigate, and transfer existing risks
but improvements are required as emerging risks and changing
conditions could lead to a weakened risk management capacity. The risk
program does not expose the business to immediate financial loss or
regulatory noncompliance. The director must make improvements within
60 days.
4
Needs Improvement
5
• Overall risk program is not adequate.
• The risk management procedures are partially formalized and
documented and not communicated. Risk procedures require
improvement to assure that risk processes are fully documented and
need to be clearly communicated. The business unit needs to obtain
assurance that the risk process is understood.
• Risk management systems require improvement to ensure reliability of
procedures to accurately, and in a timely manner, identify, document,
and assess existing and new risks. Controls require improvement to
ensure the ability of mechanisms to manage, mitigate, and transfer
existing and emerging risks as changing conditions will possibly lead to
a weakened risk management capacity. The line of business, without
improvements, is likely to be vulnerable to financial loss or regulatory
noncompliance. Improvements are required within the next 30 to 60
days.
6
Impaired
7
• Overall risk program is impaired.
• The risk management procedures are informal and undocumented and
not communicated for the most part. Risk procedures require
improvement to assure that risk processes are fully and accurately
documented and must be communicated and understood by the
business.
• Risk management systems require significant improvement to ensure
reliability of procedures to accurately and in a timely manner identify,
document, and assess existing and new risks. Controls require
extensive improvements to secure the ability to manage, mitigate, and
transfer existing and emerging risks, as conditions will lead to a
weakened risk management capacity. Risk program exposes the
business to potential financial loss or regulatory noncompliance.
Improvements are needed within the next 30 days.
8
10. 10
Rating Scale Definition
Unsatisfactory
9
• Overall risk program is not acceptable.
• The risk management procedures are largely nonexistent,
undocumented and not communicated. Risk procedures must be
instituted, formalized, documented and communicated.
• Risk management systems must be implemented immediately to
accurately and in a timely manner identify, document, and assess
existing and new risks.
• Implementation of control mechanisms is required to manage, mitigate
and transfer risks present in business processes and possess flexibility
to react under changing conditions. The line of business is exposed to
material financial loss or regulatory noncompliance. Improvements are
needed within the next two weeks and the audit committee must be
made aware of improvements to be implemented.
10
AUDIT REPORT RATING GUIDELINES
Rating Scale Definition
Effective
1
• No high-risk issues
• No medium-risk issues
• No more than three low-risk issues
2
• No high-risk issues
• No more than one medium-risk issue
• No more than six low-risk issues
Monitor
3
• No high-risk issues
• No more than three medium-risk issues
• No more than four low-risk issues
or
• No high or medium-risk issues and more than six low-risk issues
4
• No high-risk issues
• No more than four medium-risk issues
• No more than six low-risk issues
Needs
Improvement
5
• No more than one high-risk issue
• No more than four medium-risk issues
or
• No high-risk issues and no more than six medium-risk issues
6
• No more than two high-risk issue
• No more than six medium-risk issues
or
11. 11
Rating Scale Definition
• No more than one high-risk issue and more than six medium-risk issues
Impaired
7
• No more than three high-risk issues
• No more than four medium-risk issues
8
• No more than three high-risk issues
• No more than six medium-risk issues
Unsatisfactory
9
• More than four high-risk issues
• More than six medium-risk issues
or
• No more than two high-risk issues and more than six medium-risk issues
10
• No more than four high-risk issues
• No more than six medium-risk issues
XYZ AUDIT RATINGS
ST Strong
The audited area meets or exceeds Company X standards in all critical respects. Level
of internal controls is functioning effectively and efficiently. Information systems and
user operations are integrated and support the business. Generally, no more than two
“Low” observations were noted.
SA Satisfactory
The audited area meets the overall Company X standards. Generally, no more than two
“Important” observations may exist that are being promptly addressed by management.
A few “Notable” observations may also exist.
N
Needs
improvement
The audited area does not meet Company X standards overall. Generally, there is
either at least one “High” observation and/or at least three “Important” observations,
which if uncorrected could expose Company X to an unacceptable risk.
U Unsatisfactory
The audited area contains unacceptable gaps in the overall control structure and/or
controls are not working as intended. Generally, there are at least one “High”
observation and/or five “Important” observations. The area requires immediate attention
with oversight by senior management.
Business Importance Codes
H High
Risk involves a substantial and direct exposure to loss of assets and/or misstatement of
financial information and/or loss of revenue and/or significant negative impact on
operating effectiveness and/or the company’s reputation. High likelihood and high impact
may occur.
I Important Risk involves an unacceptable and direct exposure to loss of assets and or misstatement
of financial information and/or loss of revenue and/or negative impact on operating
12. 12
effectiveness and/or the company’s reputation. Moderate likelihood and moderate to
high impact or high likelihood and moderate impact may occur.
N Notable
Risk involves an important but indirect and limited level exposure to loss of assets and/or
loss of revenue and/or negative impact on operating effectiveness and/or the company’s
reputation, which is outside of Company X’s risk appetite. Low likelihood and moderate
to high impact or moderate likelihood and moderate to low impact may occur. This also
includes low-impact/high-likelihood observations.
L Low
Generally, issues classified in this category are brought to management’s attention as an
efficiency improvement. Low likelihood and low to moderate impact or low to moderate
likelihood and low impact may occur.
Note: Each audit report observation is assigned a priority rating to establish its level of criticality. The
ratings are assigned collaboratively by internal audit and XYZ Company management responsible for the
process being audited.
Overall Classifications: COSO
F Financial Reporting Reliability of the financial reporting process
O Operational Operational effectiveness and efficiency
C Compliance Compliance with applicable laws and regulations
S Strategic High-level goals aligned with and supporting the mission of XYZ Company
INTERNAL CONTROL OPTION CRITERIA
Based on the results of the audit, the system of internal controls will be rated as “Strong,” “Satisfactory,”
“Unsatisfactory” or “Critical” based on the following criteria:
Rating Definition
Strong Satisfactory Unsatisfactory Critical
• Issues do not exist. • Issues are not likely to
impair business
operations or
jeopardize financial
integrity.
• Significant issues
exist.
• Corrections are
required to avoid or
contain exposure.
• Prompt action is
required.
• Significant issues
find/indicate
processes/results are
unreliable.
• Impact of weaknesses
is likely widespread/
compounding.
• Immediate attention is
required.
13. 13
Attributes of Control Environment
Strong Satisfactory Unsatisfactory Critical
• Control
processes/monitoring
are effective.
• Control
processes/monitoring
are effective for key
cycles/functions.
• Control
processes/monitoring
weaknesses/are not
effective.
• Control monitoring is
not in place or is
extremely unreliable.
• Low potential for
undetected errors and
omissions exists.
• Major issues would
likely be detected.
• Major issues may not
be detected and
corrected.
• Losses/undetected
errors and omissions
are likely.
• Company policy and
GAAP are adhered to.
• Policy and GAAP
compliance issues
have no material
impact on operations
or financial
statements.
• Policy or GAAP
noncompliance could
(or does) have a
material impact on
operations/financials.
• Policy or GAAP
noncompliance issues
are severe, pervasive
and material to
operations/financials.
• Financials/results are
reliable; therefore,
adjustments are not
necessary.
• Financial adjustments,
if any, are minor.
• Material financial
adjustments may be
required.
• Financials/results are
likely unreliable. Major
problems exist.
• Regulatory
compliance issues do
not exist.
• Regulatory
compliance issues, if
any, are minor and
isolated.
• Regulatory
compliance issues
may show signs of
being systemic.
• Compliance issues are
significant and carry
severe consequences
(fines, sanctions, etc.).
• Risk to the CBI image
is nonexistent.
• Issues carry low-level
(or no) risk to the CBI
image.
• Issues may carry
potential for damage
to the CBI image.
• Issues may carry
severe risk of damage
to the CBI image.
• Ethics issues do not
exist.
• Ethics issues, if any,
are minor and
management takes
timely, appropriate
corrective actions.
• Ethics issues are not
appropriately
addressed and/or
management does not
set the appropriate
tone.
• Ethics issues are not
addressed
appropriately and/or
management does not
set the appropriate
tone.
AUDIT RATING EXAMPLE
Audit Ratings Are Assigned Based on the Following Definitions
Rating Definition
Satisfactory
The audited area has effectively assessed its risks; implemented control processes; and
complied with applicable policies, procedures, and appropriate laws and regulations. We may
have noted a few inconsistencies, but compensating controls exist that sufficiently minimize
the risk of loss.
Generally
Satisfactory
The audited area has adequately assessed its risks and has implemented generally effective
control processes. We may have noted some weaknesses in controls, but they are not such
that the audited area is significantly exposed to the risk of loss. Such audited areas are in
14. 14
Rating Definition
general compliance with applicable policies, procedures, and appropriate laws and
regulations.
Marginal
The audited area has control, policy, procedural, compliance and/or repeat findings that are
sufficiently important to warrant the attention of more senior levels of management. Any
deterioration in the current operating routine could lead to serious exposures and regulatory
criticisms.
Unsatisfactory
The audited area has serious control, policy, procedural, compliance and/or repeat findings.
Losses may not yet be realized, but exposure to potentially serious loss may exist. Exposure
may also exist to potentially serious criticism by regulators. Such situations require urgent
action and senior management involvement in implementing corrective action.
Unrated
This rating is generally reserved for first-time audits, limited scope audits and special
projects.
15. 15
APPENDIX A: DEFINITION OF INTERNAL AUDIT RATINGS AND RANKINGS
Definition of Issue Rankings
Adequate Needs Improvement Inadequate
• There are no identified issues
that have either a “Medium” or
“High” ranking.
• There may be a limited number
of issues with a “Low” ranking
and/or other observations for
potential improvement.
• There are one or more identified
issues with either a “Medium” or
“High” ranking.
• A deficiency or combination of
deficiencies impact the design
and/or operating effectiveness
of control for the area under
review to the extent that
required control objectives may
not be consistently achieved.
• The deficiency or combination
of deficiencies impacts the
company’s ability to provide
reasonable assurance over the
effective design and/or
operation of control, thus
affecting the company’s risk
exposure within the area being
reviewed.
• The deficiencies merit prompt
attention and remediation by
management to improve the
overall design and/or operating
effectiveness of control for the
area under review to meet
required control objectives.
• There are one or more identified
issues with either a “Medium” or
“High” ranking.
• A deficiency or combination of
deficiencies significantly impair
the design and/or operating
effectiveness of control for the
area under review to the extent
that required control objectives
may not be consistently
achieved.
• The deficiency or combination
of deficiencies significantly
impacts the company’s ability to
provide reasonable assurance
over the effective design and/or
operation of control, thus
affecting the company’s risk
exposure within the area being
reviewed.
• The deficiencies merit
immediate attention and
remediation by management to
improve the overall design
and/or operating effectiveness
of control for the area under
review to meet required control
objectives.
High
• The issue is a control deficiency, which represents a significant gap in the design
and/or operating effectiveness of the control affecting the company’s ability to address
relevant risks and to provide reasonable assurance regarding the achievement of
desired outcomes.
• The issue requires an immediate, comprehensive, corrective action plan with progress
to be monitored by an appropriate level of management.
Medium
• The issue is a control deficiency, which represents a gap in the design and/or
operating effectiveness of the control affecting the company’s ability to address
relevant risks and provide reasonable assurance regarding the achievement of desired
outcomes.
• The issue requires prompt attention to ensure that internal controls are designed
and/or operating effectively.
Low
• The issue represents an opportunity to improve control and processes to support the
achievement of desired outcomes.
16. 16
• The issue should be addressed promptly, as time and resources permit.
Considerable professional judgment is required in applying the ratings defined and used in this report regarding
individual findings, recommendations, and in formulating an overall conclusion. Accordingly, others could rate the
findings or conclusion differently and this should be born in mind when considering this report.
17. 17
APPENDIX B: RATING OF AUDIT FINDINGS
Rating
Categories
Risk/Impact Explanation
Need for Action and
Responsible Function
Reporting Obligations
Particularly
Severe (A)
Risks threatening the
existence of the
organization include:
• Fatal material losses
• Image loss/publicly
effective impact
(massive loss of
customers)
• Violation of regulatory
requirements (and
possible revoking of the
operating license)
• Urgent remediation by the
management board
required immediate
involvement of the
supervisory body
• Monitoring of timely
remediation by internal
audit (follow-up)
Refer to reporting obligations
for Major (C) and Severe (B)
findings, and:
• Immediate notification of
the supervisory body by
the management board
Severe (B) Critical risks for business
continuity include:
• Very high material
losses (losses are not
detected timely)
• Image loss/publicly
effective impact
(adversely affects the
image on the market)
• Violation of regulatory
requirements (and
possible criminal
liability, etc.)
• Immediate remediation by
the management board
required (immediate
involvement of the
supervisory body and the
supervisory authorities in
case of severe findings
against management
board members).
• Monitoring of timely
remediation by internal
audit (follow-up).
Refer to reporting obligations
for major findings (C) and:
• Immediate submission of
the internal audit report to
the management board
• Immediate notification of
the chairman of the
supervisory body and the
supervisory authorities by
the management board in
case of severe findings
against management
board members
• At least annual reporting
from the management
board to the supervisory
body (highlighted findings,
including remedy
measures taken and their
implementation statuses)
18. 18
Rating
Categories
Risk/Impact Explanation
Need for Action and
Responsible Function
Reporting Obligations
Major (C) High risks for business
continuity include:
• High material losses (if
weaknesses are not
remedied timely)
• Image loss (many
internal and external
parties are affected)
• Violation of regulatory
requirements (and
possible fines, etc.)
• Remediation required
close supervision by the
responsible member of
the management board
• Monitoring of timely
remediation by internal
audit (follow-up)
• Highlighted in the internal
audit report
• Included in the (annual)
overall internal audit report
to the management board
(including remedy
measures taken)
• Reported to the
supervisory body by the
management board at
least annually, if not
remedied
• If not remedied within an
appropriate period, the
responsible member of the
management board must
be informed in writing (If
the findings remain
unresolved during the
financial year, the
management board must
be informed in writing in
the next (annual) overall
internal audit report, at the
latest.)
Improvement
Opportunity
(D)
Medium risks for business
continuity include:
• Medium material
losses
• Image loss (internal,
some external parties
are affected, if
applicable)
• Noncompliance
with/implementation of
certain regulatory
requirements
• Implementation of certain
improvement measures
recommended
• Monitoring by the head of
the audited organization
unit (Immediate
involvement of the
management board is not
required.)
• Monitoring of timely
remediation by internal
audit (follow-up)
• Included in the internal
audit report
• Not included in the
(annual) overall internal
audit report
Comment (E) • Low or no risks
• "Food for thought" for
improvement/further
development
• Decision on the
prioritization and
implementation of
measures remains in the
audited organizational
unit.
• Monitoring by the head of
the audited organization
• Summarized in the internal
audit report or a separate
management
summary/memo
• Not included in the
(annual) overall internal
audit report
19. 19
Rating
Categories
Risk/Impact Explanation
Need for Action and
Responsible Function
Reporting Obligations
unit (Involvement of the
management board is not
required.)
• Not included in the follow-
up by internal audit