What is an Audit? A GRC Guide to Internal Audit, IT Audit, Business Assurance, and More.

Audit and assurance activities are crucial to every business and even more vital to ensuring that individuals and communities thrive.

Imagine a bank where you have your savings and retirement accounts. Regular audits and assurance activities ensure that the bank manages your money responsibly, adheres to regulations, and protects against fraud. What happens if those measures fail?

Your finances and plans would be impacted and altered. Your savings could be stolen or mismanaged, and your emergency fund depleted, jeopardizing your ability to handle unexpected expenses and potentially impacting your retirement, plans to buy a home, or plans to travel.

Your trust in the bank would diminish. You might hesitate to invest or save in financial institutions altogether, opting instead to keep cash at home, which can be risky and less beneficial for long-term financial growth.

Broader financial instability across the market would be triggered. Other financial institutions could be affected, jobs could be lost, and businesses could struggle with reduced consumer confidence and financial flexibility, ultimately altering the state of their communities. But what happens if they’re treated with care and priority?

Your peace of mind is maintained.

Your financial future remains secure.

Your communities remain intact.

So, how do we ensure that stays the case?

The Ultimate Guide to Audit and Assurance

We do it through implementing Governance, Risk, and Compliance (GRC) and Principled Performance.

GRC professionals protect organizational stability and communities. They address issues, fix problems, and provide insights into various business areas, including the board, executive teams, strategy, risk, compliance, quality, HR, internal controls, information security, and audit.

They work across six critical disciplines to maintain organizational stability, ensure individual protection, and maintain their community. The disciplines they work across are Governance and oversight, Strategy and performance, Risk and decision Support, Compliance and ethics, Security and continuity, and Audit and Assurance.

Audit and Assurance professionals enhance and protect organizational value by offering risk-based, objective assurance, advice, and insights. They focus on significant organizational objectives and risks, especially in high-risk areas. While assurance covers a broad range of reviews and assessments, formal audits are a key component, and the term "Audit" is well-recognized for its importance and clarity.

Audit and Assurance professionals use the Ultimate Guide to Audit and Assurance as a guide for daily job functions. The guide, created by OCEG™ (the founder of GRC), is a 98-page document crafted by over 33 senior GRC professionals. It offers a thorough exploration of GRC Audit and Assurance, ensuring that professionals who use it have the knowledge and tools they need to excel.

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To fully understand Audit and Assurance as a GRC discipline, we must first understand it from a traditional perspective.

What is Audit?

An audit objectively assesses an organization's financial health and operational efficiency. This process helps stakeholders, including management, investors, and regulators, make informed decisions based on verified information. There are four major types of audits.

Types of Audits

• Financial Audit: A financial audit focuses on the accuracy of financial statements and the effectiveness of financial reporting processes. It verifies that the financial records are presented fairly and comply with generally accepted accounting principles (GAAP).
• Operational Audit: This type of audit examines an organization's efficiency and effectiveness. It assesses processes, systems, and procedures to identify areas for improvement and ensure that resources are used optimally.
• Compliance Audit: A compliance audit evaluates whether an organization adheres to external laws, regulations, and internal policies. This type of audit is crucial for identifying potential legal risks and ensuring that the organization operates within the legal framework.
• IT Audit: An IT audit assesses an organization's information technology systems and processes. It focuses on data integrity, confidentiality, and availability, ensuring that IT controls are effective and aligned with business objectives.

Each type of audit plays a critical role in enhancing organizational GRC, ultimately contributing to improved decision-making and stakeholder confidence.

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What is Assurance?

Assurance refers to a service that provides independent verification and confidence in the accuracy and reliability of information. This process enhances confidence that the organization has the people, processes, systems, and structure to reliably achieve objectives, address uncertainty, and act with integrity. It helps stakeholders, including management, investors, and regulators, make informed decisions based on trustworthy assessments. There are types of assurance services.

Types of Assurance Services

• Review Services: These involve a limited examination of financial statements or processes, providing moderate assurance that no material modifications are needed. They are less comprehensive than an audit but offer a useful level of assurance for stakeholders.
• Agreed-Upon Procedures: This type of assurance involves performing specific procedures agreed upon by the auditor and the client. The results are reported based on the findings of these procedures, addressing particular areas of concern without offering a full audit opinion.
• Risk Assessments: Assurance services also include evaluating potential risks to an organization’s objectives. This process identifies vulnerabilities and provides insights into effective risk management strategies, enhancing overall organizational resilience.

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Audit and Assurance in a GRC Context

Now that we understand Audit and Assurance in a traditional context, we can examine how Audit and Assurance are critical GRC disciplines.

What is GRC Audit and Assurance?

Audit and Assurance is a discipline of Governance, Risk, and Compliance (GRC). Its activities provide independent evaluations and assessments of an organization’s operations, controls, and compliance with regulations.

In GRC, Audit and Assurance focuses on providing independent, objective evaluations that enhance Principled Performance. This discipline is crucial in affirming that an organization possesses the necessary people, processes, and systems to achieve its objectives effectively while managing uncertainty and acting with integrity.

An audit systematically examines financial statements, internal controls, and business processes to ensure accuracy, reliability, and compliance with relevant laws and standards. Audits can be conducted internally by the organization's staff or externally by independent auditors.

Assurance encompasses a broader range of services that provide stakeholders with confidence in the integrity and reliability of information. This can include reviews, risk assessments, and evaluations of processes and controls. Assurance services help organizations improve their operations and decision-making by providing insights and recommendations.

Together, Audit and Assurance contribute to transparency, accountability, and trust, which are crucial for effective governance and risk management in any organization.

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Assurance in GRC

GRC assurance involves objectively evaluating subject matter—such as statements, conditions, events, or activities—to provide confidence that beliefs about this subject matter are justified and accurate.

Assurance is conducted by a provider who evaluates evidence against suitable criteria, including laws, regulations, best practices, and organizational policies. This process helps identify gaps and ensures that organizational activities align with intended outcomes.

Assurance functions provide valuable insights into significant organizational objectives and associated risks. For example, typical assurance functions may encompass:

• Risk Management
• Information Security
• Ethics and Compliance
• Financial Controls
• Quality Control

Assurance providers evaluate the subject matter against various forms of evidence to draw conclusions about organizational efficiency and protection. After completing their evaluation, they provide regular feedback and practical advice. These activities empower management and boards to make informed decisions that enhance organizational value.

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Audit in GRC

In GRC, audits are a subset of the assurance discipline that offers higher assurance than regularly occurring activities.

Audits are essential for verifying the accuracy of financial statements and compliance with regulations relevant to a business's industry. While audits can be mandated by law, they also provide confidence to stakeholders regarding the organization’s financial health and operational effectiveness. Audits can be performed internally by someone on an organization’s staff or externally by a contracted source.

Internal audits often carry out various audit evaluations and may perform additional assurance forms, further contributing to the organization’s governance framework. Internal audits typically report directly to the Audit Committee of the Board, ensuring transparency and accountability.

External audits provide an unbiased and objective assessment of financial statements and compliance with applicable regulations. This independent review is particularly important for publicly traded companies, as it assures investors and regulators that the financial statements present a true and fair view of the organization's performance.

Principled Performance, GRC, and Audit and Assurance

The goal of the Audit and Assurance is to enable Principled Performance, defined by OCEG™, the founder of GRC, as the ability to reliably achieve objectives, address uncertainty, and act with integrity.

Audit and Assurance are integral to GRC because they involve collaborating with various roles and critical disciplines to ensure that assurance activities align with organizational strategies.

To effectively implement the Audit and Assurance GRC discipline, organizations should:

• Prioritize Assurance based on objectives, opportunities, obstacles, and obligations.
• Plan, Perform, Report, and Monitor Assurance Assessments systematically.
• Use Design and Substantive Testing Techniques to evaluate subject matter comprehensively.
• Communicate with Stakeholders to enhance confidence and foster a culture of accountability.

GRC Audit and Assurance is vital for safeguarding organizational integrity and effectiveness. By integrating assurance processes into governance frameworks, organizations can comply with regulatory demands and achieve strategic goals, ultimately enhancing trust and stakeholder confidence.

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Why Audit and Assurance is Important in GRC

Assurance provides reliability in organizational operations by ensuring that what is believed to be happening is indeed occurring as intended. It instills confidence in management, governing authorities, and stakeholders that the organization's processes are designed correctly and functioning as designed. This confidence is essential for effective governance and informed decision-making.

Assurance is vital because it:

• Builds Confidence: It ensures that stakeholders can trust the integrity of information and processes, reducing uncertainty and fostering transparency.
• Supports Informed Decision-Making: Assurance helps stakeholders make decisions based on reliable assessments, aligning operational practices with strategic goals.
• Identifies Gaps: By evaluating the subject matter against criteria, assurance providers can identify discrepancies, allowing organizations to address vulnerabilities and improve performance.
• Aligns with Strategic Goals: Organizations must design Audit and Assurance capabilities to meet regulatory requirements and support Principled Performance that aligns with their strategic objectives.

Assurance is critical in an organization's Governance, Risk, and Compliance (GRC) framework. The assurance level depends on the assurance provider's objectivity and competence. Objectivity refers to the provider's impartiality, while competence relates to their ability to employ professional techniques in their evaluations.

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Key Activities of GRC Assurance

Assurance Providers compare evidence against Suitable Criteria, including laws, regulations, policies, standards, guidance, or best practices. Evidence includes documentation, metrics, management statements, or other relevant information. By evaluating the evidence against criteria, Assurance Providers identify gaps, thus providing confidence that objectives will be achieved on time and at planned costs.

Assurance activities include, but are not limited to:

• Assessments of governance activities, including whether:
  1. Structures are in place to help manage Total Performance. (effectiveness, efficiency, agility, and resilience).
  2. Information is provided for decisions and risks.
  3. Ethical values are upheld.
  4. People are accountable.
• Assessments of risk management activities, including whether:
  1. Risks have been identified and evaluated from well-defined objectives.
  2. Responses to risks are appropriate.
  3. Reporting on risks is appropriate and updated for changes.
• Assessments of compliance activities, including whether the area under review:
  1. Complies with internal or external written obligations.
  2. Establishes well-designed internal controls.
  3. Complies with the well-designed internal controls.
• Assessment of various operational areas and activities, generally covered through operational and/or performance auditing:
  1. Assurance providers evaluate operational processes to determine whether they are effective and efficient in achieving their intended objective.

Key Components of Assurance

The key components of Assurance capabilities include:

• An Audit and Assurance policy that provides overall guidance for the organization.
• An Audit and Assurance strategy that defines what the services will involve and directs the long-term plans, investments, and priorities.
• An Audit and Assurance plan that guides tactical and operational efforts while contributing to achieving long-term strategic goals. A regularly updated plan is recommended to focus on the more significant risks to the organization and its objectives.
• Adequate resourcing permits the strategy and plans to be delivered and services being implemented to be effective.
• Strong management engagement and support allow the organization to address its many assurance needs.

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Audit and Assurance Certifications

Audit certifications play a crucial role in establishing the credibility and expertise of professionals in the field. They validate an individual’s knowledge and skills and enhance trust among stakeholders, including management, investors, and regulators.

Certified auditors are often better equipped to navigate complex regulatory environments, identify risks, and implement effective governance practices. As organizations increasingly rely on audits to ensure compliance and operational effectiveness, possessing recognized certifications becomes essential for career advancement and organizational success.

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Types of Audit Certifications

Several prestigious certifications are available for audit professionals, each focusing on different aspects of auditing and assurance:

• Certified Internal Auditor (CIA): The CIA certification is globally recognized and focuses on the internal auditing profession. It covers essential areas such as governance, risk management, and internal control. CIAs are equipped to evaluate and improve an organization’s operations, making them vital contributors to organizational effectiveness and compliance.
• Certified Information Systems Auditor (CISA): The CISA certification is tailored for professionals specializing in information systems auditing, control, and security. It validates the skills necessary to assess the adequacy and management of information systems, ensuring that organizations protect their data and comply with relevant regulations.
• Certified Government Auditing Professional (CGAP): The CGAP certification is designed for public-sector auditors. It emphasizes government auditing principles, practices, and standards, preparing professionals to navigate public-sector auditing and accountability challenges.

In addition to these traditional certifications, OCEG™ offers several valuable certifications that enhance professionals' understanding of governance, risk management, and compliance:

• GRC Professional™ (GRCP™): This certification provides foundational knowledge in GRC principles, equipping professionals with the skills needed to contribute to GRC initiatives within organizations effectively. It teaches OCEG™’s globally implemented Capability Model and is the only source of comprehensive GRC knowledge on the market.
• GRC Auditor™ (GRCA™): The GRCA™ certification focuses specifically on the auditing aspects of GRC, empowering auditors to assess and improve governance and compliance frameworks within their organizations. It teaches OCEG™’s globally implemented Capability Model and is the only source of comprehensive GRC Auditor™ knowledge on the market.
• Integrated Audit and Assurance Professional (IAAP™): The IAAP™ certification combines Audit and Assurance principles, fostering a holistic approach to organizational oversight. It equips professionals with the tools necessary to integrate various audit functions within the GRC context. This certification is meant to be a capstone course for individuals pursuing, or already in, a career in Audit and Assurance. The certification will showcase your ability to understand the impact of audit and assurance from an integrated perspective across the business. It is recommended in addition to other, more traditional audit certifications.

Together, these certifications help ensure that Audit and Assurance professionals are well-prepared to address the complexities of modern organizational governance and compliance.

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Frequently Asked Questions (FAQ)

• What is Audit and Assurance? Audit and Assurance are critical components of Governance, Risk, and Compliance (GRC) that provide independent evaluations and assessments of an organization's operations, controls, and compliance with regulations. Audit focuses on systematically examining financial statements and business processes, while assurance encompasses a broader range of services designed to enhance confidence in the accuracy and reliability of information.
• What is an Audit? An audit systematically examines an organization’s financial statements, internal controls, and business processes. Its primary aim is to ensure accuracy, reliability, and compliance with relevant laws and standards. Audits can be conducted internally by the organization's staff or externally by independent auditors.
• What is Assurance? Assurance refers to services that provide independent verification and confidence in the accuracy and reliability of information. It enhances confidence that the organization has the necessary people, processes, and systems to achieve its objectives and address uncertainty reliably. Assurance services can include reviews, risk assessments, and evaluations of processes and controls.
• What is the Difference Between Audit and Assurance? The main difference between Audit and Assurance lies in their scope and depth. Audits provide a higher level of assurance through detailed evaluations of financial statements and compliance with regulations, whereas assurance encompasses a broader range of services that offer varying degrees of confidence in information accuracy and reliability. While audits are more formal and standardized, assurance services can be more flexible and tailored to specific needs.
• What Does Audit and Assurance Do? Audit and ssurance activities enhance organizational value by providing independent evaluations that affirm the effectiveness of governance and compliance practices. They help identify gaps in processes and controls, support informed decision-making, and build stakeholder confidence. Regular assessments, audits, and assurance improve operational efficiency and risk management, ultimately enabling organizations to achieve their strategic objectives.

Download The Ultimate Guide to Audit and Assurance to read more on Audit and Assurance Today.