A Report on The Effectiveness of Internal Audit Page: 8 of 9
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Appendices
Appendix 2:
Effectiveness Criteria
Criteria used to evaluate the effectiveness of
internal audit functions was developed from
the Texas Internal Auditing Act, the
Codification of Standards for The
Professional Practice ofInternal Auditing,
and Government Auditing Standards (1994
Revision).
Effectiveness or ineffectiveness is based on a
series of actions or outcomes for each criteria.
The degree of participation or outcome is also
a key element of effectiveness. Explanations
of the eight basic effectiveness criteria are as
follows:
- Board/Management Involvement in
Internal Audit Function - The agency's
board, commissioners, or elected official
and executive management are adequately
involved in the internal audit function and
in completing their responsibilities under
the Texas Internal Auditing Act.
Both the oversight body and management
have responsibilities under the Texas
Internal Auditing Act. They are charged
with:
- Identifying the internal audit
function's objectives and needs
- Appointing the director of internal
audit
- Approving the internal audit charter
- Monitoring actions on audit reports
- Approving the internal audit
department's budget and audit plan
Whether the oversight body and the
executive management of the organization
believed that the internal audit function
was effective was a significant element in
our evaluation.A REPORT ON
THE EFFECTIVENESS OF INTERNAL AUDIT" Organizing and Managing the Internal
Audit Function - The internal audit
director is effective in managing and
organizing the internal audit department,
based on administrative and
organizational tasks.
The director's primary responsibilities are
to develop policies and administer
procedures for the operation of the
internal audit function.
Methodologies should be established to:
- Guide the allocation of internal audit
resources.
- Develop risk assessment.
- Prepare an audit plan.
- Complete field work.
- Perform quality assurance reviews.
- Participate in peer reviews.
Administration should also cover how
reports are distributed and what actions
are taken to implement recommendations.
" Assessing Entity Risks - A risk assessment
is used in the audit planning process, and
all agency risks are identified and
appropriately ranked.
The methodology used to perform risk
assessment should include input from
oversight bodies such as boards,
commissions, or elected officials;
executive management; and staff.
The process for identifying risk factors
and assigning values (including a
definition of the value), as well as the
level of management participation, is
important. The process should provide
assurance that all significant risks to the
business of the agency have been
identified and defined.PAGE 6
JULY 1997
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Texas. Office of the State Auditor. A Report on The Effectiveness of Internal Audit, report, July 1997; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth518119/m1/8/?rotate=270: accessed July 18, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.