Internal and Governmental Financial Auditing and Operational Auditing Chapter 26_part1 docx

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 1
Internal and
Governmental
Financial Auditing
and Operational Auditing
Chapter 26
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Learning Objective 1
Explain the role of internal
auditors in financial auditing.
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Internal Auditing
 The New York Stock Exchange requires its
registrants to have an internal audit function
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Internal Auditing
It 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.
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©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 5
Institute of Internal Auditors
Ethical Principles
 Confidentiality
 Objectivity
 Competency
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Institute of Internal Auditors
Rules of Conduct
 Integrity
 Confidentiality
 Objectivity
 Competency
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Relationship of Internal and
External Auditors
 The external auditor is responsible
to financial statement users
 The internal auditor is responsible
to management
Differences:
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Relationship of Internal and
External Auditors

 Competency
 Methodology
 Objectivity
 Audit risk model
Similarities:
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Learning Objective 2
Describe the auditing and
reporting requirements under
Government Auditing Standards
and the Single Audit Act
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Governmental Financial
Auditing
The primary source of authoritative literature
for performance of government audits is
Government Auditing Standards,
which is issued by the GAO.
Because of the color of the cover, it is usually
referred to as the “Yellow Book.”
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