(270) 506-5140 CONTACT US
Login
Examination Preparation

7 Elements to a Proper Internal Audit Program for Vendor Risk Management

Jul 17, 2018 by Venminder Experts

Having an established internal audit program at an organization is a great way to find gaps or items that may have been missed before, such as any disconnect between your vendor management policies and procedures and the final work product.

The organization’s internal audit program consists of the policies and procedures that govern the internal audit function. Ultimately, how comprehensive an internal audit program is may vary depending on the size of the organization. Either way, it should ALWAYS include these seven elements.

7 Elements to Include in Your Internal Audit Program

Do you have these seven elements?

  1. A mission statement or audit charter. It should outline the following:
    • Purpose
    • Objectives
    • Organization
    • Authorities
    • Responsibilities of the internal auditor, audit staff, audit management and the audit committee

  1. A risk assessment process. This will describe and analyze the risks inherent in a given line of business.

  2. An audit plan. The plan should include internal audit's budgeting and planning processes.

  3. An audit cycle. Meaning, identify the frequency of audits.

  4. Audit work programs. These should set out for each audit area the following:
    • Required scope and resources
    • The selection of audit procedures
    • The extent of testing 
    • The basis for conclusions

  1. Written audit reports. The reports should inform the board and management of individual department or division compliance with policies and procedures.

  2. Follow-up processes. These require internal auditors to determine the disposition of any agreed upon actions to correct significant deficiencies.

The Goal of an Internal Audit Program 

Specific to vendor management, the objective of an internal audit program should be to evaluate the controls and processes required to effectively conduct and manage the risk associated with the overall vendor management program within your organization. 

  • Does your organization have the appropriate controls in place to mitigate risks that are present in the vendor management program framework, due diligence process, contracting, services review and the overall monitoring and management of vendor relationships?
  • The Internal Auditor must be able to identify and assess the riskswith each of the control activities reviewed during the audit of the vendor management program.
  • Mitigation plans need to be assigned and monitored for those risks that have been identified within the audit that require remediation. 

The audit program needs to ensure that you've implemented risk mitigation controls appropriate for the size, scale and scope of the third parties being utilized to deliver products or services. The scope and objectives of the audit will also depend on the overall maturity and governance structure of the vendor management program, and it should include all areas within the organization that are involved in the execution of the program (e.g., procurement, IT, information security, legal, compliance, operations, etc.). 

It must clearly document the objectives, scope, audit procedures, control activities, test steps and work to be performed along with evidence and supporting artifacts that will be collected. This drives the observations, findings, risk ratings, results and recommendations as the end-result.

Venminder Experts

Written by Venminder Experts

Venminder has a team of third party risk experts who provide advice, analysis and services to thousands of individuals in the financial services industry.

Follow Venminder Experts
Subscribe--Bg.jpg

Subscribe to the Venminder Blog