Moeller - Brinks modern internal auditing a common body of knowledge

The Wiley Corporate F&A series provides information, tools, and insights to corporate professionals responsible for issues affecting the profitability of their company, from accounting and finance to internal controls and performance management.

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Asia, and Australia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers' professional and personal knowledge and understanding.

Cover design: Wiley

Copyright 2016 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The Seventh Edition was published by Wiley in 2009.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Moeller, Robert R.
Brink's modern internal auditing : a common body of knowledge / Robert R. Moeller. Eighth edition.
pages cm. (Wiley corporate F&A)
Revised edition of the author's Brink's modern internal auditing, 2009.
Includes index.
ISBN 978-1-119-01698-4 (hardback) ISBN 978-1-119-18000-5 (ePDF) ISBN 978-1-119-17999-3 (ePub) ISBN 978-1-119-18001-2 (oBook) 1. Auditing, Internal. I. Title.
HF5668.25.M64 2015
657'.458dc23
2015023640

Dedicated to my best friend and wife, Lois Moeller.
Lois has been my companion and partner for over 45 years,
whether we are somewhere in the world visiting an interesting historical location,
attending one of Chicago's many music and theater events,
gardening vegetables in the backyard,
or finding the right wine and cooking the produce.

This book is a complete guide and a definition of a common body of knowledge (CBOK) for the processes and profession of internal auditingwhat professionals need to know to successfully perform individual internal audits and what an enterprise needs to know to launch an effective internal audit function. With a heritage that goes back to the first days of internal auditing after World War II when Victor Brink produced the first edition, the chapters following outline a professional CBOK and describe internal auditing today. Although it is often misused, the word modern beginning with the title of the first edition says a lot about this books heritage and the contemporary practice of internal auditing. In the first edition it described a new and evolving profession. The early internal auditors were often little more than accounting clerks or clerical support staff for their external auditors. Brink envisioned them as professionals performing much broader services to management.

Due to the pervasiveness of information technology processes and the Internet in all areas of commerce, the rules for a consistent definition of internal controls, and our evolution to a truly global economy, internal auditors today must operate in an ever-changing environment. Internal auditors need increasing levels of knowledge and understanding in many areas, but sorting through what is important and what is just nice to know represents challenges for internal auditors at all levels. This newly revised eighth edition discusses modern internal auditing in terms of areas where there is a strong knowledge requirement as well as other areas where only a general level of knowledge is needed. This edition updates our three common CBOKs for the profession of internal auditing.

The practice of internal auditing is important to enterprises today worldwide, and senior management members, government regulators, and other professionals need to have a general understanding and set of expectations of the roles and capabilities of internal auditors. That is, just as internal auditors need a CBOK to better define their profession, the outside world needs to better understand internal auditors and how they can serve management at all levels.

The following chapters describe this CBOK for internal auditorsknowledge areas that should be important to all internal auditors, no matter their level of experience, their business area, or where they are working in the world. The CBOK topics presented here are not based on surveys of what other internal auditors are doing today; they are based on this authors long-term, 40-plus years of experience in internal auditing as well as his extensive professional activities and research.

The following are some of the CBOK elements found in each chapter:

Part One: Foundations of Modern Internal Auditing. These two introductory chapters highlight the importance of internal auditing today in all aspects of business, government, and other activities, as well as why a CBOK is important.

1. Significance of Internal Auditing in Enterprises Today. This introductory chapter talks about the origins of internal auditing. It does not contain key CBOK information, but provides important background knowledge and history for todays internal auditor and explains what led Victor Brink to write the first edition.
2. An Internal Audit Common Body of Knowledge. In this chapter, we explain and expand the concept of an internal auditing CBOK and why it is important to the profession.

Part Two: Importance of Internal Controls. The review and assessment of internal controls are key internal audit activities. The five chapters in this part describe internal control reviews in terms of the newly revised COSO internal control framework, the Sarbanes-Oxley Act (SOx) requirements, and several internal control frameworks including COBIT.