subject: WAK MODEL - THE WAY OF BEST SOLUTION FOR AN ORGANIZATION INTERNAL AUDIT PROCESS, (PART – 02) [print this page] 09. Role of auditors09. Role of auditors
The auditor's opinion on the truth, fairness, accuracy etc. of the financial statement imposes a larger responsibility on the auditor, which transcends the relationship with the client. The external auditor has to maintain total independence from the client. The auditor is supposed to be a watchdog. Government, creditors, investors and the business and financial community rely on the independence, objectivity and integrity of the auditors for maintaining confidence in operations of a company.
Too continually review and update control for adequacy and ensure controls established are strictly adhered to and in line with the guiding objectives of the Centre. Directly Ensure Compliance in all departments
Monthly checks the Cashier record and the Supervisor's posting into the cash book and Pastel.
Verifies and checks all supporting documents for purpose, beneficiary, value authorization and date
Check and ensure that relevant processes are followed for stock requisition
Ensure internal control measures are operating as laid down
Ensure overview function of internal audit is spread all over the operation of the Centre
Carry out Spot check on all movable assets including cash
10. Responsibilities of auditors
Internal Auditor:
Internal Audit is a service to management. Its functions include examining and evaluating internal control and providing assurance to the management. It is a part of the organization's system of internal control and its scope includes ALL aspects of internal control, not just financial control. The scope of internal audit is much wider than statutory/external audit as discussed in detail above. It should ideally cover all the organization's activities.
In short approach:
Develop, document, implement, test, and maintain a comprehensive internal audit plan and system of internal controls to help provide assurance that applicable laws, regulations, and College policies and procedures are complied with judiciously
Examine financial transactions for accuracy and compliance with institutional policies and applicable laws and regulations
Evaluate financial and operational procedures to assure adequate internal controls are present;
Identify, assess, and evaluate the College's risk areas; make appropriate recommendations for improved internal controls and accounting procedures; and research and adopt industry best practices where appropriate
Work with the senior leadership of the College to identify key business risks, assess those risks, and establish risk management procedures and practices based on industry best practices
External Auditor
External auditors have to express an opinion on accuracy and fairness of financial information. An external audit program encompasses a full-scope financial statement audit, an attestation of internal controls over financial reporting, or other agreed-upon external audit procedures.
A typical report includes inter IIA, information on
Whether they have obtained all the necessary information
Whether the companies has kept all the requisite books of accounts
Whether the financial statements are in conformity with books of accounts
The financial statements present a true and fair view of the state of affairs
Proper records for assets, inventory, loans etc. have been maintained by the company
Adequacy of internal control procedures
Existence of internal audit system commensurate with nature and size of business.
Details of statutory dues and matters under litigation
Although internal and external auditors have different and clearly defined roles they do share the same broad purpose of serving the public by helping to ensure the highest standards of regularity and propriety for the use resources and in promoting efficient, effective and economic administration.
11. Types of Audits
In preparing the Annual Internal Audit Plan, the Internal Auditor shall determine the type of audit to be performed for each auditor. The following is a summary of the various types of audits which will generally be conducted:
I. Financial audit:
Financial audits are designed to validate the accuracy and completeness of records and account balances. Financial audits will utilize substantive tests, analytical reviews, and other validation procedures which may or may not include functional tests or transaction reviews.
In financial audits, significance or materiality is usually defined as a monetary value consequently, planning decisions mainly involve the intended degree of audit assurance and the extent of audit work required to provide it. The requirements will vary from one organization to another and applicable laws and regulations. Some activities common to most audits:
Risk assessment
Defining Materiality
Financial statement assertions
Financial analysis of cash flow statement
Compliance and substantiate procedures
Analytical procedures
Meeting these objectives involves verification of:
Revenue
Sales
Bank deposits
Bank reconciliation
Accounts payable
Accounts receivable
Disbursements
Petty cash transactions
Loans & Advances
Assets
II. Operational Audits
This type of audit involves a thorough review of a department's operating procedures and internal controls. They deal with broad performance issues, focusing on whether funds and resources have been economically, efficiently and effectively managed to fulfill the mission and objectives. An operational audit includes elements of a compliance audit, a financial audit, and an information systems audit. In particular, management audits examine and report on matters related to any or all of the following:
The adequacy of management systems, controls and practices, including those intended to control and safeguard assets, to ensure due regard to economy, efficiency and effectiveness;
The extent to which resources have been managed with due regard to economy and efficiency; and,
The extent to which programs, operations or activities of an entity have been effective.
III. Departmental Audits:
Departmental audits are designed to review and evaluate the activities and operations of a particular College function, activity, department, or unit under review. Departmental audits will evaluate accounting controls, ensure compliance with College policies and procedures, applicable laws and regulations, and validate the records and account balances of the auditor. Departmental audits will utilize a complete battery of audit tests and procedures, including, but not limited to, functional tests, transaction reviews, substantive tests, and analytical reviews.
IV. Operational Audits:
Operational audits are designed to evaluate procedures and controls which impact the attainment of the College's organizational goals and objectives. Operational audits also measure compliance with College policies and procedures as well as applicable laws and regulations. During operational audits, functional tests and transaction reviews will be utilized.
V. Grant and Contract Audits:
Grant and contract audits are designed to evaluate the contracting process, compliance with the provisions of grants and contracts, and third-party contractual performance. These audits may be performed with respect to any function, activity, department, or unit of the College and shall include all types of contracts; e.g., federal and private grants and contracts, construction contracts, and professional service contracts.
VI. Fraud and Financial Irregularity Audits:
Fraud and financial irregularity audits are designed to verify the existence and magnitude of suspected fraud and financial irregularities. Fraud and financial irregularity audits may be conducted at the request of the Finance Committee of the Board of Trustees, the President, other senior members of College management; as a result of a tip from the College's whistleblower hotline; or at the discretion of the Internal Auditor. The Internal Auditor shall utilize the highest level of discretion when undertaking a fraud or financial irregularity audit. The Internal Auditor shall promptly notify the Finance Committee of the Board of Trustees (including the Chair of the Finance Committee), the President, and any other member of senior management which may be appropriate, of any significant findings which result from a fraud or financial irregularity audit.
VII. Follow-up Audits:
Follow-up audits are designed to determine whether corrective action has been taken on previous audit recommendations. These audits are usually conducted six months after the Final Audit Report was issued and usually include only the deficiencies reported in the Final Audit Report. The follow-up audit shall include such functional or substantive tests that are necessary to verify that necessary and appropriate corrective actions have been taken
12. The Phased Audit Approach
A phased audit approach is generally used to conduct, watch, and whole internal audits in a timely and skilled manner. This approach may not be followed for certain special projects requested by the Finance Committee of the Board of Trustees and/or senior management, during fraud or financial irregularity audits, and under other special circumstances.
This phased audit approach allows the Internal Auditor to:
Establish guidelines for completing internal audits;
Identify the entire internal audit process, rather than emphasizing the fieldwork
Component as the extent of the internal audit process;
Establish responsibilities and outputs for each phase of the internal audit process; and
Provide regular communication that serves to control and document the internal audit progress.
This audit approach is the mechanism for planning, executing, and controlling the internal audit function through periodic reports and appraisals as the internal audit process progresses.
As discussed below in more detail, the phased audit approach consists of five phases:
The planning phase;
The organizing phase;
The preliminary phase;
The conducting phase; and
The reporting phase.
Every phase of the internal audit development has definite requirements and produces specific deliverables.
(Part 02 finished > continue to Part -03)
WAK MODEL - THE WAY OF BEST SOLUTION FOR AN ORGANIZATION INTERNAL AUDIT PROCESS, (PART 02)
