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A COMPENDIUM OF STANDARDS ON INTERNAL AUDITING

- ISSUED BY THE ICAI

(SIA) 1, Planning an Internal Audit

The purpose of this Standard on InternalAudit is to establish standards and to provideguidance in respect of planning an internalaudit. An internal audit plan is a documentdefining the scope, coverage and resources,including time, required for an internalaudit over a defined period. The internalauditor should, in consultation with thosecharged with governance, including the auditcommittee, develop and document a plan foreach internal audit engagement to help himconduct the engagement in an efficient andtimely manner.

(SIA) 2, Basic Principles GoverningInternal Audit

The purpose of this Standard on Internal Audit(SIA) is to establish standards and provideguidance on the general principles governinginternal audit. Compliance with the basicprinciples requires the application of internalauditing procedures and reporting practicesappropriate to the particular circumstances.

(SIA) 3, Documentat ion

This standard lays down the documentationrequirements during the course of an internalaudit. Internal audit documentation meansthe record of audit procedures performed,including audit planning as discussed in the

Standard on Internal Audit (SIA) 1, Planningan Internal Audit, relevant audit evidenceobtained, and conclusions the auditorreached (terms such as working papersor work papers are also sometimes used).

Thus, documentation refers to the workingpapers prepared or obtained by the internalauditor and retained by him in connection withthe performance of his internal audit.

(SIA) 4, Reporting

The purpose of this Standard on Internal Audit(SIA) is to establish standards on the form andcontent of the internal auditors report issuedas a result of an internal audit performed

by an internal auditor of the systems,processes, controls including items offinancial statements of an entity. The internalauditors report should contain a clear writtenexpression of significant observations,suggestions/ recommendations based onthe policies, processes, risks, controls andtransaction processing taken as a whole andmanagements responses.

(SIA) 5, Sampling

The purpose of this Standard on InternalAudit (SIA) is to establish standards on thedesign and selection of an audit sampleand provide guidance on the use of audit

sampling in internal audit engagements.The SIA also deals with the evaluation of the

sample results. This SIA applies equally toboth statistical and non-statistical samplingmethods. Either method, when properlyapplied, can provide sufficient appropriateaudit evidence. When using either statisticalor non-statistical sampling methods, theinternal auditor should design and selectan audit sample, perform audit proceduresthereon, and evaluate sample results so as toprovide sufficient appropriate audit evidenceto meet the objectives of the internal auditengagement unless otherwise specified bythe client.

(SIA) 6, Analytical Procedures

The purpose of this Standard on InternalAudit (SIA) is to establish standards on the

application of analytical procedures duringan internal audit. Analytical proceduresmeans the analysis of significant ratios andtrends, including the resulting investigationof fluctuations and relationships in bothfinancial and non-financial data that areinconsistent with other relevant informationor which deviate significantly from predictedamounts.

This standard spells out the nature andpurpose of Analytical Procedures, its role inplanning and conducting the internal auditand final review, and the extent of relianceon such procedures.

(SIA) 7, Qualit y Assurance in InternalAudit

The purpose of this Standard on Internal Audit(SIA) is to establish standards and provideguidance regarding quality assurance ininternal audit. A system for assuring qualityin internal audit should provide reasonableassurance that the internal auditors complywith professional Standards, regulatory andlegal requirements, so that the reports issuedby them are appropriate in the circumstances.

(SIA) 8, Terms of Internal AuditEngagement

The purpose of this Standard on InternalAudit is to establish standards and provideguidance in respect of terms of engagementof the internal audit activity whether carriedout in house or by an external agency. A clarityon the terms of the internal audit engagementbetween the internal auditors and the users oftheir services (hitherto known as auditee)is essential for inculcating professionalismand avoiding misunderstanding as to anyaspect of the engagement. This standarddescribes the essential elements of Termsof Engagement, i.e., scope, responsibility,authority, confidentiality, limitations

reporting, compensation and compliancewith standards.

(SIA) 9, Communicat ion wit h

ManagementThis Standard on Internal Audit providesa framework for the internal auditorscommunication with management andidentifies some specific matters to becommunicated with the management suchas, the Internal Auditors responsibilities inrelation to the Terms of Engagement, PlannedScope and Timing of the Internal Audit andSignificant Findings from the Internal Audit.It also provides guidance in establishing thecommunication process, form and timing ofcommunication, documentation and helpsmeasure the adequacy of the communicationprocess.

(SIA) 10, Internal Audit Evidence

Paragraph 14 of the SIA 2, Basic PrinciplesGoverning Internal Audit, states:

The internal auditor should, based on hisprof essional judg ment, obta in suff ici entappropriate evidence to enable him to drawreasonable conclusions therefrom on whichto base his opinion or findings.

The purpose of this Standard on InternalAudit is to amplify the basic principle outlinedabove and to provide guidance in respectof applicability of this standard during aninternal audit. An internal auditor is requiredto collect appropriate evidence out of hisaudit process to substantiate his checkingand findings. This Standard deals with thequalitative and quantitative aspects ofevidence in internal audit.

(SIA) 11, Considerat ion of Fraud in anInternal Audit

The primary responsibility for prevention anddetection of frauds rests with managementand those charged with governance. However,an internal auditor should, therefore, use hisknowledge and skills to reasonably enablehim to identify indicators of frauds. Thisstandard lays down the procedure to befollowed by an internal auditor to identify risks

of such frauds and help the management fulfilits responsibilities relating to fraud preventionand detection.

(SIA) 12, Internal Control Evaluation

The purpose of this Standard on InternalAudit is to establish standards and provideguidance on the procedures to be followedby the internal auditor in evaluating thesystem of internal control in an entity andfor communicating weaknesses therein tothose charged with governance. It lays downprocedures for testing the Internal Controlsof the entity.

(SIA) 13, Enterprise Risk Management

The purpose of this Standard on InternalAudit is to establish standards and provide

7/24/2019 A Compendium of Standards on Internal Auditing

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guidance on review of an entitys riskmanagement system during an internalaudit or such other review exercise withthe objective of providing an assurancethereon. This Standard applies where theinternal auditor has been requested by themanagement to provide such an assurance

on the effectiveness of its enterpriserisk management system. Enterpriserisk management enables managementto effectively deal with risk, associateduncertainty and enhancing the capacity tobuild value to the entity or enterprise and itsstakeholders. Internal auditor may revieweach of these activities and focus on theprocesses used by management to reportand monitor the risks identified.

(SIA) 14, Internal Audit in anInformation Technology Environment

An information technology environmentexists when one or more computer(s) of any

type or size is (are) involved in the processingof financial information. The overall objective

and scope of an internal audit does notchange in an IT environment.

However, an IT environment may affect:

a) The procedures followed by the internalauditor in obtaining a sufficientunderstanding of the processes,

systems and internal control system;and

b) The auditor's review of the entitys riskmanagement and continuity systems.

The purpose of this Standard on Internal Audit(SIA) is to establish standards on proceduresto be followed when an internal audit isconducted in an information technology (IT)environment

(SIA) 15, Knowledge of the Entit yand its Environment

The purpose of this Standard on InternalAudit is to establish standards and provideguidance on what constitutes the knowledge

of an entitys business, its importance tothe various phases of an internal audit

engagement and the techniques to beadopted by the internal auditor in acquiringsuch knowledge about the client entity andits environment, prior to commencing aninternal audit engagement and subsequentlythereafter, at all stages of the internal auditprocess. This Standard also sets out the

guidelines regarding the application, usageand documentation of such knowledge by theinternal auditor.

(SIA) 16, Using t he Work of an Expert

The purpose of this Standard on InternalAudit is to establish standard and provideguidance where the internal auditor usesthe work performed by an expert. When theinternal auditor uses the work of an expert, heshould satisfy himself about the competence,objectivity and the independence of suchexpert and consider the impact of suchassistance or advice on the overall result ofthe internal audit engagement, especially incases where the outside expert is engagedby the senior management or those chargedwith governance. It lays down principles foridentifying the need to use the Work of anExpert and evaluating the work of such Expert.

(SIA) 17, Considerat ion of Laws andRegulat ions in an Internal Audit

This Standard on Internal Audit (SIA) dealswith the internal auditors responsibilityto consider laws and regulations whenperforming an internal audit. This SIA alsoapplies to other engagements in which theinternal auditor is specifically engaged totest and report separately on compliance withspecific laws or regulations.

It lays down the procedures for Considerationof Compliance with Laws and Regulation andto identify instances of Non-Compliance of thesame

Invitation for Contribution of ArticlesSIRC of ICAI invites Articles from Members for publication in the SIRC Newsletter.SIRC is releasing Theme Based monthly Newsletter. The theme finalized for theJuly, August & September 2012 issues are as follows:

Month Theme Articles to reach SIRC on or before

July Non Corporate Taxation June 21, 2012August Corporate Taxation July 10, 2012September Tax Audit August 10, 2012

Members may send the soft copy of their article, profile and passport size colourphotograph to SIRC by email to sirc@icai.in and sircnewsltr@icai.in for considerationby the Editorial Board on or before the above said dates.

Membership and Certificate of Practice Feefor the year 2012-2013

Annual Membership Fee and Certificate of Practice Fee for the year 2012-2013 ispayable on 1st April 2012. The schedule of fee is as under:

For Members below ageof 65 years

Associate Membership Fee : 800/-Fellow Membership Fee : 2200/-Certificate of Practice Fee : 2000/-

For Members above age of 65 yearsAssociate Membership Fee : 600/-Fellow Membership Fee : 1600/-Certificate of Practice Fee : 1500/-

It may be noted that remittance of fee has to be made by local cheque (in case ofMembers who are residing in the cities in which respective Decentralised Office issituated) or by way of demand draft in favour of Secretary, The Institute of CharteredAccountants of India, payable at the place where the concerned Decentralised Officeis located. It may also be noted that under no circumstances out-station cheques willbe accepted. No remittance should be made directly to the Head Office or a differentDecentralised Office.

Members can also pay fee in advance in accordance with details given in thecommunication already sent to the members.

Members are advised to remit the fee at the earliest. For more details visit ourwebsite www.icai.org.