5th-Dec2021 NAME & ID-> Subject & Section-> Accounting Information System (Sec A) Topic-> Internal Auditing & Internal Control & Risk Management in AIS Faculty-> Niaz Mohammad Table of Content & Sub content Introduction Objectives Literature review Opportunities Challenges Bangladesh Perspective Introduction Internal auditing is associate freelance, objective assurance associated consulting activity designed to feature price to and improve an organization's operations. ... Professionals known as internal auditors are used by organizations to perform the interior auditing activity. Internal audits value a company’s internal controls, together with its company governance and accounting processes. These audits guarantee compliance with laws and laws and facilitate to take care of correct and timely money reportage and knowledge assortment. Internal audits conjointly give management with the tools necessary to realize operational potency Control that create method, established by associate entity's board of administrators, management and alternative personnel, designed to supply affordable assurance: That data is reliable, correct and timely. Of compliance with applicable laws, laws, contracts, policies and procedures. Associate Auditor ought to make sure that bound rules and procedures are followed by the business unit he's engaged on, in spite of the actual fact that an electronic equipment of control is as sole responsibility of the management. The Auditor will merely guide or facilitate the management if he's asked to try and do therefore, as a result of he has no authority to inflict such rules and procedures. The degree of reliance on the system depends upon the effectiveness of control system; thus, the Auditor ought to review and value the interior system of a corporation to organize his program. For all businesses, there square measure risks that exist and wish to be known and self-addressed so as to forestall or minimize losses. Risk is that the threat that an occurrence, action or non-action can adversely have {an effect on} an organization’s ability to attain its business objectives and execute its methods with success. Risk is measured in terms of consequences and probability. Risk management should management known risks to assist the corporate deliver the goods its performance and profitableness targets, stop loss of resources, guarantee reliable monetary coverage, and guarantee compliance with laws and rules, avoiding injury to its name and different consequences. Objectives & background of system The auditor's opinion that accompanies money statements is predicated on Associate in nursing audit of the procedures and records won’t to turn out them. As a part of Associate in nursing audit, external auditors can take a look at a company's accounting processes Associate in nursing internal controls and supply an opinion on their effectiveness. An inside audit could be a make certain is conducted at specific times, whereas management control} is to blame for checks that are ongoing to create certain operational potency and effectiveness are achieved through the control of risks. Internal Control-> Internal control system provides reliable and accurate data that is necessary for decision making and to run business activity efficiently. Adequate internal control system safeguard business assets, in absence of it, assets of the company may be stolen, misused or accidentally destroyed. Internal control system within organization is necessary to discourage and stop non performing business activities and to protect business from wastage is all aspects of the business. Internal control system insures that rules and procedures are to be followed by business personnel. Internal Auditing-> Management decision to choose cost effective control system may reduce the effectiveness of internal auditing system. There are chances of misuse by a person of authority who is operating on internal control system & auditing process. Objectives of internal systems may be defeated by manipulation of management. Since internal auditing is involved in routine transactions, irregular transactions may be overlooked. Changes in conditions may affect the effectiveness of internal control & also auditing. The objective of risk management is to assist determine and document the organization's risks in vital business methods and also the internal controls inside every process to mitigate those risks. Risk management must control identified risks to help the company achieve its performance and profitability targets, prevent loss of resources, ensure reliable financial reporting, and ensure compliance with laws and regulations, avoiding damage to its reputation and other consequences. Literature review The Internal control system ought to be reviewed by the Auditor before star audit as delineated below − 1. To frame programmer consistent with gift circumstances. Frauds, errors and mistakes are seemingly to be situated or not. 2. To review existence of internal programmer and to envision the potency of control system. 3. To review the dependability of reports, records and certificates as conferred by the management. 4. To check if there's any chance of improvement in existing control system. 5. Reviewing the system of accounting entries, whether or not recorded as per principle or not. The objective supported the subjective judgment of the authority and also the control analysis of the pure mathematical model. Early control studies have shown that private judgment and skilled expertise have a major impact on control analysis, therefore the analysis of control is generally supported this… The internal audit projected by the on top of students doesn't ought to swear an excessive amount of on the subjective judgment of the authority, or is just too strictly physics and physics, leading to the dearth of sensible proxy variables within the actual application, the model hypothesis is tough to simply accept and also the price of use is comparatively high. In advanced things, they're not wide adopted in observe. However, it arranged the inspiration for the follow-up researchers to still study and construct a scientific and affordable internal audit analysis system… The audit system reviewed by the Auditor before star audit as delineated below − <KEY TAKEAWAYS> 1. Internal audits square measure the mechanisms, rules, and procedures enforced by a corporation to confirm the integrity of monetary and accounting info, promote irresponsibleness and stop fraud. 2. Besides yielding with laws and laws, and preventing workers from stealing assets or committing fraud, internal auditors will facilitate improve operational potency by rising the accuracy and timeliness of monetary news. 3. Internal audits play a vital role in a very company’s internal controls and company governance, currently that the Sarbanes-Oxley Act of 2002 has created managers de jure to blame for the accuracy of its money statements. 4. An internal audit offers risk management and evaluates the effectiveness of a company’s internal controls, company governance, and accounting processes. 5. Internal audits offer management and board of administrators with an added service wherever flaws in a very method could also be caught and corrected before external audits. In today’s difficult world economy, there's a necessity for distinctive, assessing, managing associate degreed observance an organization’s business opportunities and audit risks. The idea of enterprise risk management (ERM) helps elevate the main focus of risk management from the plan of action to strategic level. The aim of this publication is to deal with a number of the foremost normally asked queries with relation to ERM. It offers ideas, suggestions and insights to executives to blame for ERM implementation.. Opportunities In the past, crises of this nature failed to target the role of internal auditing. Today, several square measure trying to the inner audit operate and therefore the chief audit government as a part of the answer to a perceived breakdown within the systems of business coverage, control, and moral behavior. The matter has become thus severe that even the overall public is setting out to perceive the essential role that the inner auditing profession will play. Company management must amendment, however it conjointly must be able to demonstrate the quality of its leadership. Specifically, at intervals organizations, those charged with governance got to offer assurances that they need enforced effective governance processes which all info reportable to the general public is itself credible. The inner auditing profession’s role during this method are often a big one. we have a tendency to conjointly believe that the key to continued development of basic, applied, and education analysis in internal auditing is to require advantage of our information of accounting establishments and call settings to supply a basis for the choice of vital analysis topics. Chance risk management may be a vital component in each enterprise. Risk assessment is taken into account because the basis that has an effect on the sort and severity of the undertaken strategy... The audit management is meant to create tutorial researchers additional aware of the wealthy context of internal audit apply whereas presenting abstract frameworks that may promote higher understanding of connected ideas and theories & Risk Management helps to a method during which the advantages square measure tangible. The secret's to make sure that risk manage is as well as in each method at intervals the enterprise. During this respect, the analysis queries appended to every chapter are often very useful in selecting one or additional lines of analysis merit exploration and investigation. Not solely this however conjointly chance Management helps eliminate poor ideas before they consume substantial resources and permits at an equivalent time the event of powerful ideas that support the continued development of the enterprise. Like with managing opportunities, Associate in Nursing audit risk manager is answerable for organizing a team which can follow a risk treatment arrange and report back on current progress of project risk management strategy to beat from this. Challenges The audit profession in East Pakistan is within the initial stages of clutches technology. The unexpected move to a virtual setting could be an important initial shift. Getting audit proof is wherever the crisis begins. Access to the first document, confirming the supply, and management over preparation, are important factors of ‘evidence.’ The audit proof that's 'sufficient and appropriate' to create a basis for an opinion is currently completely different. Remote access, electronic records, scan copies of the document, video conferencing, and virtual conferences are the new toys. These changes be getting balance confirmations and account statements. Auditors can need to use their judgement in determinative if the proof therefore obtained is reliable. They need to exercise skepticism regarding such records' credibleness and perform further procedures to assess controls over manufacturing these electronic records. Revision of audit plans Risk assessment could be a dynamic method in an audit. Auditors should assess further risks conferred because of Covid-19, the changes within the organization’s operations and methods, and revise existing audit plans consequently. Auditors ought to assess the impact on accessibility the provision chain, reducing client base, new channels of operation, written agreement breaches, worker absence, changes in method and procedures to fulfill the present setting, modification to elements of controls, and also the risk of fraud. Audit groups will need to contemplate the impact on materiality because of all of those. Going concern The pandemic has forced governments to implement physical restrictions that have caused disruptions to operations. These embrace supply-chain disorder, hyperbolic value of materials, export restrictions, reduced demand, and loss of contracts, delays in money flows, problem grouping debts and liquidity problems. Audit groups can need to assess the management's assessment of the organization as a going concern. They’ll need to check if all factors impacting a going concern are thought of and perform further audit procedures to check the assumptions employed in such analysis. These embrace management's forecasts, the amount thought of, the chance of uncertainty, prolonged imprisonment measures in several geographical locations and then on. Asset verification Lockdown has had a major impact on physical inventory counts ANd quality verifications in an audit. There ar things wherever physical count couldn't be administrated by the organization at the amount finish, absence of auditors' physical presence throughout the physical count, inventory command at a third-party location. Audit groups can need to assess if physical count is administrated on a special date, with further procedures like rollback, remote observation through a live feed, or perform alternate procedures like document verification, and reconciliation. Wherever physical verification or alternate audit procedures don't seem to be potential to get decent proof, auditors could need to assess the impact on their opinion. Accounting estimates Accounting estimates and disclosures ar the responsibilities of the management. They’re pervasive throughout the money statements and also the audit. Some examples are: impairment of assets, providing for a decline in price of investments, valuation of assets, and loans and advances. The management uses assumptions and projections within the use of such estimates. The uncertainty around these assumptions might increase, as there's no clarity on however long Covid-19 can last. Auditors should check the appropriateness of the assumptions, ways applied, and dependableness data of used. Procedures ought to embrace a take a look at for connation and appropriateness to the present setting. The audit team could need to use specialists (say, valuation specialists), as acceptable. Consolidations If the parent company's auditor isn't the auditor of all the part corporations, he uses the part auditors' work. In these times, the principal auditor could face challenges in meeting the part audit team, evaluating and review essential audit operating papers, acquire decent acceptable proof in time, or perhaps face restrictions within the transfer of knowledge. Wherever the part auditor has not been able to get adequate proof or perform audit procedures, it might impact the audit of the cluster entity. Subsequent events Management is needed to think about events that occur once the reportage amount and use their judgements in preparation of monetary statements. Amounts recognized within the money statements are adjusted to replicate adjusting events, whereas solely disclosures are needed for material nonadjusting events. Given the uncertainties concerned round the pandemic amount, the management's assessment can need to be reviewed oft and updated until the money statements are issued. Focus on data security The pandemic has forced folks to admit technology at a pace that organizations wouldn't are ready for. This includes enabling a piece from home setting, remote access to records, data, information, ERP, processing, information transfer, cloud storage, and virtual conferences. This hyperbolic role of technology has introduced a further specialize in data technology reviews in audits, for auditors to get confirmation and assurance on controls for the safety, availability, confidentiality, and privacy of the knowledge collected, processed, stored, and their disposal. The absence of such outlined technology controls in organizations that don't seem to be matured would need further audit procedures. In short, the neo-normal challenges need the auditor to appraise crucial aspects of the audit ceaselessly. Hence, the audit procedures can need to be dynamic and strong with the dynamic times. Several parts of AN audit are going to be compact by the pandemic, and therefore the importance of the exercise of skilled skepticism and judgement by auditors obtains a lot of substantial significance. Bangladesh Perspective Bangladesh Securities and Exchange Commission and the Institute of Chartered Accountants of Bangladesh have demonstrated a keen interest in implementing International Accounting Standards (IAS) and International Standards on Auditing (ISA) to upgrade the quality of corporate financial reporting. Various steps have already been taken, however, further results will require the design and implementation of a comprehensive action plan on accountancy reform. This report includes policy recommendations, which may be used as in puts for such an action plan. This report provides an assessment of accounting and auditing practices within the broader context of the Bangladesh institutional framework and capacity needed to ensure the quality of corporate financial reporting. The accounting and auditing practices in Bangladesh suffer from institutional weaknesses in regulation, compliance, and enforcement of standards and rules. The preparation of financial statements and conduct of audits, in many cases, are not consistent with internationally acceptable standards and practices. Better-qualified graduates generally do not join the accounting profession because it is not viewed as a stepping-stone to a rewarding and prestigious career. The out-of-date legal requirements, widespread noncompliance with accounting and auditing standards, in effective enforcement mechanism, poor quality accounting education and training, and inadequate adherence to professional ethics have contributed to the weakness of the financial reporting regime. The policy recommendations provided in this report focus on improving statutory framework, strengthening enforcement mechanisms, upgrading professional education and training, and enhancing capacity of regulatory and professional bodies. A major recommendation is that an independent oversight body Financial Reporting Council should be established….. 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