Internal Auditing: Assurance & Advisory Services
4th edition
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
BUSINESS PROCESSES AND RISKS
Chapter 5
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Learning Objectives
Understand how organizations structure their activities to achieve their objectives.
Identify key business processes in an organization.
Obtain an understanding of a given business process and be able to document it.
Understand basic types of business risks organizations face.
Identify and assess the key risks to an organization’s objectives and how they are linked to business processes.
Develop an audit universe for an organization and determine an annual internal audit plan based on key business risks.
Understand how to use risk assessment techniques within assurance engagements.
Obtain an awareness of the new risks that arise when an organization outsources some of its key processes.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Standards relevant to business processes and risks
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Business processes
How organizations structure their business to implement strategies and achieve their business objectives
Set of coordinated activities
Types of business processes
Operating processes
Management and support processes
Projects
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Managing Risk
Acceptance: No action is taken. Organization is willing to accept the risk rather than spend valuable resources to control it.
Avoidance: A decision is taken to divest from the risk activities and avoid it.
Pursuit: Exploit the risk if it advantageous to the organization.
Reduction: Necessary controls are implemented to reduce its impact.
Sharing: Necessary insurance is taken against the risk to share its impact with others.
Chapter 5: Business Processes and Risks
Types of business processes
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Levels of process description
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Documenting
processes
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Documenting processes
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Documenting processes
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Approaches to understanding the business process
Top Down
Start at entity level with organization’s objectives
Identity key processes critical to success
Match the key process to achieving the objective
Bottom Up
Start with processes at the activity level
Then aggregate across the organization
Works well for smaller organizations
Strategic
Business Process
Risk Factor / Audit Universe Approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Strategic approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Strategic approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Strategic approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Business Process approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Business Process approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Risk factor/audit universe
approach
Definition of audit universe
Audit universe: the activities that the internal auditing function has identified as auditable subjects, activities, units or functions.
Things to consider:
audit charter
mandatory coverage
organization's formal structure
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Risk factor approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Risk factor approach
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Example
Risk Control Matrix
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
example
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
example
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Tools to use
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Tools to use
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Chapter 5: Business Processes and Risks
Tools to use
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.
Internal Auditing: Assurance & Advisory Services, 4th Edition © 2017 by the Internal Audit Foundation.