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The subjects of risk assessment and analytical auditing are recent important developments in the general area of auditing; they are also subjects that are equally important to the general function of government financial management. First focuses on analytical auditing because it directs attention to situations where analysis indicates that there are unusual, unexplained relationships that should receive attention. Next, determines the degree of importance of the indicated aspects, the process of risk analysis.

The advantages and disadvantages of using case studies are stated. The IIA Internal Auditing Case Study Project is discussed, and an anatomy of a case study is presented. The techniques of case study analysis are given.

One of the three areas to which internal auditing is targeted is effectiveness. Yet we do not often determine whether the internal auditing function is itself operating effectively. We must identify the basic objective of internal auditing, define the goals to be accomplished, establish measures relative to achieving those goals, and finally evaluate the overall internal auditing process. We must separate the usual measures of output from the overall measures of outcome to determine the cost effectiveness and operational improvement aspects of the internal audit process. The former, the time‐honored internal audit output measures must be supplanted by internal audit effectiveness achievements.

Presents a series of issues related to the behavioural relationships between internal auditors and their auditees. Includes suggestions for the resolution of problems that occur in these issue areas. Covers such subjects as motivating the auditee, styles of management, managing change and conflict, communications, hostile relationships, participative auditing, understanding the auditee’s culture and the use of behavioural knowledge in the audit.

Governments function differently from business organizations. Thus, performance or operational auditing becomes necessary to replace the measure of success evidenced by the latter through the measurement of profit. Governments are evaluated through performance auditing by measuring efficiency, economy, and effectiveness. Unique planning, specialized staffing, government oriented scope and government management reporting constitute the parameters of a performance auditing model appropriate for government officials and stakeholders.

Describes the strategy to be used for internal audit engagements, including: the selection of the audit′s objective; developing the basic plan to achieve the objective; consideration of such aspects as risk and materiality; anticipation of potential technical problems; alternative methods of resolving the problems; integration with other audit projects; optimum timing of the audit elements; and potential interpersonal problems and their resolution.

Compares two studies, one in 1983 and one in 1994, of the reaction of a randomly selected group of internal auditors of various levels of competence and in various industrial groups to 20 vignettes identifying a series of internal auditing related ethical situations. The vignettes of the two studies were the same. The auditors′ responses on a scale varied from “forced separation” to an indication of “no ethical impact”. The results of the comparison indicated that there were changes in the industry groups, generally towards a more strict approach and a recommended set of stronger sanctions.

Internal auditing has during the 1990s become a dynamic discipline. Most of this change has been the result of the progressive approach taken by the leaders of the profession in applying the technological and behavioral innovations and advances in thinking to an operation that has tended in the past to be conservative and reactionary. The new approaches are substantial in number and individual in context. The trend is to group the following areas: philosophical, methodological and operational. The constantly evolving changes require that internal auditing itself be constantly evaluated to ensure that it is functioning efficiently and effectively.

From a management viewpoint, identifies the quantitative information relative to environmental activities the management should have. Describes the types of auditing that should be conducted to protect the organization. Cost and liabilities must be established on an objective and realistic basis. Auditing by external and internal auditors must be the safety valve – the control that helps to ensure that there will be a minimum exposure to serious problems and then, when the problems occur, that the requirements of the government agencies are met.