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Internal auditing for “one & all” (second edition)
 

Internal auditing for “one & all” (second edition)

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The depth and scope of examination, time of audit, processing methods, etc. In deciding on a specific technique, also need to take account of the objective of the audit action and the capacities ...

The depth and scope of examination, time of audit, processing methods, etc. In deciding on a specific technique, also need to take account of the objective of the audit action and the capacities limited by time or other factors.

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    Internal auditing for “one & all” (second edition) Internal auditing for “one & all” (second edition) Document Transcript

    • Internal AuditingForOne & All(Second Edition)By: Mohammad Wahid Abdullah khan
    • 12.1. WAK Model - The way of best solution for an organization internal auditprocess, (1st, part)SUMMARY: “WAK” model is a internal auditing process tool by which this tools an internalauditor wishing to implement an strategic process to complete the auditing program, only thesepresented three stage of WAK model process are well elaborated and know, for base on thisprocess tool an internal auditor is able to formulate and implement the auditing aim, Auditors canwork in a wide variety of settings. Auditors employed by private business, corporations, andfinancial companies also employed by both state and government agencies.“WAK” model approach that if you want to be an auditor. You must have excellent analyticalskills and great attention to detail. You must be proficient in accounting and auditing computersoftware & changes in law. Auditors should also possess a high standard of professional integrityas decisions are implemented on the basis of their statements and service.Confronted with difficult dynamics of economic environment, businesses put an increasingemphasis on finance, management. Accounting and audit becomes more important and relevant toour daily life- as a bridge. Audit, financial, & business related education / literacy is not the onlypermeate in peoples life but also control vital business arteries and eventually; the entireeconomic systems which exposed to such a business world.I feel strongly that it is necessary to prepare everyone with a set of quantitative and analyticalskills what would make them geared up to face the real financial /economical problems withconfidently.As a financial consultant, I found that without any doubt “Internal auditing” is most importantthan ever in business today. Internal auditing function is playing a very important role to a widerange of business from local to global business organizations of manufacturing and servicesindustries. After a long study I discovered that if it is possible to make the whole InternalAuditing process in a framework through apply in an easy way. Then both of the parties(Auditors and business organizations) could find out the errors and resolve in the process ofInternal Auditing to achieve the ultimate goal of the business.I would like to interpretation my view on the explanation about the internal audit & auditorsactivities before going into the “WAK MODEL”. I have tried to make clear all the parts ofinternal auditing ahead of the WAK MODEL because I believe that the people who are relatedwith accounts, finance, auditing and also the business owners will understand overall about theinternal auditing. What is the necessary of Internal Auditing? And where is the use of “WAKMODEL”. This model will help the students/learners for bearing in mind as a career to becomean internal auditor.A. INTERNAL AUDIT OVERVIEW:124
    • 01. Summary: Internal Audit Activity and Internal Auditor in the Ethical Culture of anOrganization stresses that internal auditors, like everyone else in a company, have a role to playin corporate ethics--a role that can vary by the existence of, lack of, or degree of development ofthe organizations ethical culture. In fact, the internal auditors role can be shaped as well by theexistence, or lack, of an individual designated the chief ethics officer, furthermore internalauditors setting out to perform an ethics audit face both their own concerns about the often-uncharted territory of such tasks as well as the concerns of their colleagues and supervisors.Those concerns, experts say, can be allayed once such an audit is fully developed. Seeminglydiaphanous notions can, in fact, be quantified and examined, and issues of appropriate versusinappropriate behavior can be addressed successfully.02. Introduction > internal auditThese introductions describe - “the Internal Auditor’s responsibilities with respect to the internalaudit function. The Internal Auditor describes audit planning and scheduling, and discusses thescope and types of internal audits generally performed at the organization as well Internalauditors verify the effectiveness of their organizations internal controls and check formismanagement, waste, or fraud. They examine and evaluate their financial and informationsystems, management procedures, and internal controls to ensure that records are accurate &controls are adequate. They also review company operations, evaluating their efficiency,effectiveness, and compliance with corporate policies and government regulations,03. Why should organization audit?There are many sophisticated management tools available to organizations to help them undertakeactivities like business process re-engineering, continuous performance improvement or balancescorecards and business excellence to conduct some sort of initial assessment or audit to establisha starting position or baseline, this baseline information is then used as a reference against whichimprovements in performance over time can be measured,As far as data protection is concerned the key reasons for carrying out audit activities are:• Determines the risk appetite of the organization• Establishes the risk management framework• Identifies potential threats and assesses risks• Decides on response to risks like implementation of control• Monitors and coordinates the risk management processes and the outcomes,• Provides assurance on the effectiveness of risk management processesInternal audit can be the key source providing objective assurance that all the significant riskshave been identified, risk management process is working effectively and efficiently, risks arebeing reported and controls are effective. As part of this work, the internal audit activity willprovide advice, coaching and facilitation services to assist executive management in carrying outtheir responsibilities.04. Who conducts an internal audit?Some organizations are large enough to have a designated internal audit function. However mostinternal audit are carried out by staff members from within the organization,05. Definition of auditing125
    • “Internal auditing is an independent, objective assurance and consulting activity designed to addvalue and improve an organization’s operations. It helps an organization accomplish its objectivesby bringing a systematic, disciplined approach to evaluate and improve the effectiveness of riskmanagement, control and governance processes.”In different - “Independence allows internal auditors to carry out their work freely andobjectively. This concept requires that internal auditors are independent of the activity they audit“Objectivity is an independent mental attitude which requires internal auditors to perform auditsin such a manner that they have an honest belief in their work product and that no significantquality compromises are made. Objectivity requires that internal auditors do not subordinate theirjudgment on audit matters to others”06. What are the advantages of an internal audit?An internal audit offers several advantages; I have presented some of important advantages:• In directs management’s attention to the key business issues. The audit analyzes weaknesses inthe system of control and become the basis for practical recommendation for improvement.• It gives management confidence when controls are operating satisfactorily.•It identifies opportunities for improving efficiency and effectiveness.•It gives early notice of potential problems, so that management can take action to head them off,07. Scope of Internal AuditsThe internal audit function’s scope of operations is by its very nature quite expansive. Theinternal audit function will assist the College in fulfilling its vision, mission, strategic initiatives,and objectives, while adhering to its core values, by bringing a systematic, disciplined approachto evaluate and improve the effectiveness of enterprise-wide risk management, internal controlsystems, and governance processes.The external auditors have to express an opinion on accuracy and fairness of financialinformation. The scope of internal audit is much wider than statutory/external audit. It shouldideally cover all the organization’s activities. They include:•Financial audit –accuracy, completeness and fairness of financial statements•Operational audit- effectiveness and efficiency of operations•Safeguarding of assets•Review of projects•Management audit•Fraud detection- developing fraud exposures for every audit and detecting red flags•Review of effectiveness of internal control•Compliance with laws, regulations, policies and procedures•Preservation of ethical culture – monitors the ethical climate and report on red flags that maycompromise ethics•Providing advice on reducing waste or inefficiency08. Objectives of the internal audit:126
    • An internal audits primary object is to examine key controls• Financial – how is money handled within the organization? For example – who authorizespayment, and what checks and balance are in place to prevent unauthorized spending and fraud• Administrative – are these conducive to meeting strategic objectives.• System related – what system are in place departmentally and across the organization and howdo they fit together,The first step is to determine which of the above considerations are you priorities and set thebroad audit objectives to reflect them,09. Role of auditorsThe auditor’s opinion on the truth, fairness, accuracy etc. of the financial statement imposes alarger responsibility on the auditor, which transcends the relationship with the client. The externalauditor has to maintain total independence from the client. The auditor is supposed to be awatchdog. Government, creditors, investors and the business and financial community rely on theindependence, objectivity and integrity of the auditors for maintaining confidence in operations ofa company.Too continually review and update control for adequacy and ensure controls established arestrictly adhered to and in line with the guiding objectives of the Centre. Directly EnsureCompliance 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 anddate• 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 cash10. Responsibilities of auditors• Internal Auditor:Internal Audit is a service to management. Its functions include examining and evaluatinginternal control and providing assurance to the management. It is a part of theorganization’s system of internal control and its scope includes ALL aspects of internalcontrol, not just financial control. The scope of internal audit is much wider thanstatutory/external audit as discussed in detail above. It should ideally cover all theorganization’s activities.In short approach:• Develop, document, implement, test, and maintain a comprehensive internal audit plan andsystem of internal controls to help provide assurance that applicable laws, regulations, andCollege policies and procedures are complied with judiciously127
    • • Examine financial transactions for accuracy and compliance with institutional policies andapplicable 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 forimproved internal controls and accounting procedures; and research and adopt industry bestpractices 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 AuditorExternal auditors have to express an opinion on accuracy and fairness of financialinformation. An external audit program encompasses a full-scope financial statement audit,an attestation of internal controls over financial reporting, or other agreed-upon externalaudit 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 litigationAlthough internal and external auditors have different and clearly defined roles they do share thesame broad purpose of serving the public by helping to ensure the highest standards of regularityand propriety for the use resources and in promoting efficient, effective and economicadministration.11. Types of AuditsIn preparing the Annual Internal Audit Plan, the Internal Auditor shall determine the type of auditto be performed for each auditor. The following is a summary of the various types of auditswhich will generally be conducted:I. Financial audit:Financial audits are designed to validate the accuracy and completeness of records and accountbalances. Financial audits will utilize substantive tests, analytical reviews, and other validationprocedures which may or may not include functional tests or transaction reviews.In financial audits, significance or materiality is usually defined as a monetary valueconsequently, planning decisions mainly involve the intended degree of audit assurance and the128
    • extent of audit work required to provide it. The requirements will vary from one organization toanother 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 proceduresMeeting these objectives involves verification of:•Revenue•Sales•Bank deposits•Bank reconciliation•Accounts payable•Accounts receivable•Disbursements•Petty cash transactions•Loans & Advances•AssetsII. Operational AuditsThis type of audit involves a thorough review of a department’s operating procedures and internalcontrols. They deal with broad performance issues, focusing on whether funds and resources havebeen economically, efficiently and effectively managed to fulfill the mission and objectives. Anoperational audit includes elements of a compliance audit, a financial audit, and an informationsystems audit. In particular, management audits examine and report on matters related to any orall of the following:•The adequacy of management systems, controls and practices, including those intended tocontrol 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 aparticular College function, activity, department, or unit under review. Departmental audits willevaluate accounting controls, ensure compliance with College policies and procedures, applicablelaws and regulations, and validate the records and account balances of the auditor. Departmentalaudits 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:129
    • Operational audits are designed to evaluate procedures and controls which impact the attainmentof the College’s organizational goals and objectives. Operational audits also measure compliancewith College policies and procedures as well as applicable laws and regulations. Duringoperational 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 theprovisions of grants and contracts, and third-party contractual performance. These audits may beperformed with respect to any function, activity, department, or unit of the College and shallinclude all types of contracts; e.g., federal and private grants and contracts, constructioncontracts, and professional service contracts.VI. Fraud and Financial Irregularity Audits:Fraud and financial irregularity audits are designed to verify the existence and magnitude ofsuspected fraud and financial irregularities. Fraud and financial irregularity audits may beconducted at the request of the Finance Committee of the Board of Trustees, the President, andother senior members of College management; as a result of a tip from the College’swhistleblower hotline; or at the discretion of the Internal Auditor. The Internal Auditor shallutilize the highest level of discretion when undertaking a fraud or financial irregularity audit. TheInternal Auditor shall promptly notify the Finance Committee of the Board of Trustees (includingthe Chair of the Finance Committee), the President, and any other member of senior managementwhich may be appropriate, of any significant findings which result from a fraud or financialirregularity audit.VII. Follow-up Audits:Follow-up audits are designed to determine whether corrective action has been taken on previousaudit recommendations. These audits are usually conducted six months after the Final AuditReport 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 verifythat necessary and appropriate corrective actions have been taken12. The Phased Audit ApproachA phased audit approach is generally used to conduct, watch, and whole internal audits in atimely and skilled manner. This approach may not be followed for certain special projectsrequested by the Finance Committee of the Board of Trustees and/or senior management, duringfraud 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 fieldworkComponent 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.130
    • This audit approach is the mechanism for planning, executing, and controlling the internal auditfunction 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 specificdeliverables.131
    • (B.) “WAK” MODEL - (The way of best solution for an organization/ project internal audit process – 2nd Part)B/1. Abstract:The internal audit is an essential and now much discussed part of business, the institute of internalauditors an international association of internal auditors, offers this definition - “Internal auditingis an independent, objective assurance and consulting activity designed to add value and improvean organization’s operations. It helps an organization accomplish its objectives by bringing asystematic, disciplined approach to evaluate and improve the effectiveness of risk management,control and governance processes.” to this end internal auditing furnishes staff with analyses,appraisals, and recommendations relating to these activities Internal audit is a service itsfunctions include examining and evaluating internal control and providing assurance to themanagement. It is a part of the organizations system of internal control and its scope includes .allaspects of internal control. Not just financial control. The scope of internal audit is much widerthan external audit. It ideally covers all the organizations activities,Although internal and external auditors have different and clearly defined roles they do share thesame broad purpose of serving the public by helping to ensure the highest standards of regularityand propriety for the use resources and in promoting efficient effective and economicadministration,That would be helpful for management for understand and realize the company present position& situation so that an internal auditor can attentive the management about house organization,The internal auditor may be contracted to perform additional tests to determine whether suchpolicies and procedures are operating effectively within the service organization.B/2. Executive Summary of “WAK” Model:This “WAK” model discus the internal auditing process for the professional auditors. Internalauditor provides information that helps people in business increase their chances of makingdecisions that will benefit their companies. Auditing is the language of business, and like otherlanguages, it has its own terms and rules. Understanding this language and learning to interpret itis your first step to becoming successful in your own business and in your personal financial lifeas well.In your personal life you can use business information to make decisions through internalauditing. About investing in the business, applying for a loan, and evaluating potential jobs.Banks use Auditing information auditing to make decisions about granting loans. Governmentagencies base their regulations on Auditing information.Auditing information can even be useful to non-business entities with an interest in howbusinesses affect local, national, or foreign communities and community members. Businesses132
    • use auditing information for planning and budgeting and for making decisions about borrowingand investing.Overall, Auditing aids businesses in the process of making better decisions. The basics ofAuditing are the same regardless of the size or type of business. In this “WAK” model you willlearn through the examination of a desire small business, for more complex businesses, theeconomic transactions become more varied and complex as does the process of reporting them tovarious users.The foundation of it all, however, remains the same. This “WAK” model will give you a solidfoundation you will be able to use in any business situation you encounter. Whether you own abusiness or do not, even if you’ve never had any experience with auditing I think this is theperfect model for you. I hoping that you will find from this “WAK” model useful in helping youto understand these auditing issues as they apply to your small business and to your personal life.(C.) SOLUTION OF INTERNAL AUDIT PROCESS!The internal audit responsible for planning and implementing Individual audits, and for theoverall internal audit plan. This includes defining the scope and resources required for an audit,establishing the methodology and approach, and delegating Specific responsibilities for theoverall adequacy, quality, and reporting of such audit activity and the corridor to solution inactuality isSolution = Wish > abilities > knack (WAK)Or elseWish > abilities > knack (WAK) = SolutionThat means if you use your wishful ness from of the heart you can gain an actual ability, andapply this gain ability you can able to done your mission smoothly, also through your ability youcan show your working knack, and that is the only path of internal auditing solution,C/1.WISHFUL: I think wish means a frame or express desires concerning; to invoke in favor of,or against, any one; to attribute, or cal down, in desire; to invoke; to imprecate, Almost all humanbeings do have something to ask for from Almighty Some have a craving for some lawfulworldly objects, some have to ask for solutions of their problems, some longing for remedy ofillness and getting good health, while some have the far-sight of asking favours of the next world.Thus every one has something to ask from his/her own angle of view.Only wish could make a man to achieve his goal, every man has his own dream and to make thathappen he must be wishful, it will move to his desire for the dream bring to light,133
    • Educational requirements may vary slightly depending on the company, the area you wish towork and your previous work experience. For most all Internal Auditor careers, the minimumeducational requirement is the completion of a Bachelors degree.Internal auditors are expected to have a thoughtful audit plan, an excellent working relationshipwith management, support from the audit committee, and state-of-the-art audit tools. But unlessthe right people are in place, many internal audit departments wont be able to solution the auditprocess.An Internal Auditor will perform various types of tasks depending on the industry and whetherthe hiring organization is public or private. The main role of an Internal Auditor is to verify theaccuracy of all internal records, evaluate internal systems in order to detect any mismanagement,inefficiencies or fraudApplicants who wish their work in these areas to be considered in relation to their total Practicalexperience must demonstrate that they are equipped to fully identify the purpose, Scope andrequired function of the system under review. They also need to show that they have acquiredsufficient knowledge to practically test the system and its accuracy. They must demonstrate thatthey have the capability to recommend modifications (or alternative technical approaches) toensure the efficiency and accuracy of the system. Provided that the experience is broad enough tomeet the elements identified. The auditor performing the evaluation is concerned with the what,whom when, where, why, and how of running an efficient and effective operation. This meansthat the auditor must have knowledge of the company’s operationsI think the solution is to work in the other direction. Instead of working back from a goal, workforward from promising situations. This is what most successful people actually do anyway.Criteria examples:•Ethics-: credibility, integrity and honesty,•Open minded-: willing to listen, learn accept new ideas,•Diplomatic-: polite with high manners to his colleagues – after all he is working with people andhe is the representative of the top management,C/2. ABILITIES:The auditor’s ability to select the most appropriate strategy when conducting an audit. Auditorsmust be free to approach a piece of work in whatever manner they consider best. As a clientcompany grows and conducts new activities, the auditor’s approach will likely have to adapt toaccount for these. In addition, the auditing profession is a dynamic one, with new techniquesconstantly being developed and upgraded which the auditor may decide to use. Thestrategy/proposed methods which the auditors intend to implement cannot be inhibited in anyway.In order to be a solution your Internal Auditor process, you will need to have various sets ofabilities. You will often need to work alone on projects; therefore, you must have a strong workethic and desire to perform highly. You will also need to have very strong computer skills as wellas have current knowledge of auditing and accounting software available for your organizationstype of information system134
    • Otherwise Abilities can be useful to almost the whole thing such•what are the top 3 traits or skills every internal auditor must have to excel?•Can you suggest any tips or insights to develop your internal auditor expertise?•The three essential traits for an Internal Auditor are-Selling and communication skills andenthusiasm with leadership(1) One should be able to sell ones credentials and abilities and also be able to sell therecommendations to clients or management or process owners.(2) The Internal Auditor should also be enthusiastic to read in between lines and go beyond thenecessary Internal Audit program and documents when there is a need for the same.(3) One should have great transformational and transactional leadership skills and be able to shareknowledge, develop people and work toward a better controlled, compliant and profitablebusiness conditions so that there is protection of everyones interest and assurance of goodbusiness practicesInternal Auditors are taught to learn and enforce the rules, for instance those governing internalcontrols, policies and procedures, laws and regulations. Although this work is clearly challenging,it does not usually involve creative thinking. Creativity is not a natural talent that one either hasor doesnt have. Creative thinking can be taught and learned, just like sales or public speaking. Ofcourse, some people have more natural ability than others, but thats true of almost everything inlife.Abilities can be applied to almost everything internal auditors do. For example, abilities can helpin finding new ways to:•Ability to use standard systems:•Ability to learn new products fast.•Ability to estimate person-hours, hence cost•Strengthen the quality of audits.•Improve efficiency.•Provide value-added service to operating departments.•Increase service to management and the audit committee.•Enhance professional credibility.•Improve working conditions.Internal auditors need to have the ability to deliver a product that meets or exceeds theexpectations of senior management. Internal auditors must also be able to tell their story tomaintain their influence, relevance, and reliability within the organization.Abilities assessment:The following skills are helping an auditor for his /her self confident & ability1. Explorer - The Explorer searches for new ideas -- good or bad, rational or outrageous, seriousor silly. Many, many ideas are needed to find innovative solutions to problems and challenges. As135
    • a famous philosopher once said, "Nothing is more dangerous than an idea when it is the only oneyou have."2. Artist - The Artist takes existing ideas, provided by the Explorer, and molds or transformsthem into entirely new and unique ideas.3. Judge. - The Judge weeds out bad ideas and attempts to find workable, feasible solutions.4. Warrior - Finally, the Warrior implements the new ideas. Armed with a game plan,persistence, and diplomacy, the Warrior leads the battle against the many forces that resistchange.Each of the four steps is required if innovation is to occur. The most successful persons excel inall four areas, or they find others who complement their weaknessesCriteria examples:•Observer-: owns the ability to recognize what he sees and understand without interrogating,•Perspective-: owns the ability to evaluate situations beyond appearance and with a widesystematic,•View of things-: has the ability to understands the organizational consequences of his evidence,•Versatile-: owns the ability to mobilize from one situation to another without losing direction•Persistence-: must be persistence with his objectives and to not story away,•Decisive-: ready to make decision136
    • C/3. KNACK: (The way of best solution for an organization/ project internal audit process ­ 3rd Part)Every audit solution is based on sound planning and an atmosphere of constructiveinvolvement and communication between the client and the auditor. I see quite a few auditorganizations that include how their clients to the audit service process works. It also isdesigned to provide a resource for sharing tools and techniques for each of the distinctphases of the audit process.INTERNAL AUDIT PROCEDURES & KNACKDuring the internal audit process, the Internal Auditor may employ one or more audit techniques.Such techniques include, but are not limited to:I. Observation and InquiryThe Internal Auditor may observe the operation of any College function, activity, department, orunit. The Internal Auditor may also make reasonable inquiries of any College employee inattempting to carry out the internal audit process.II. Analysis and ReviewA principal means by which the Internal Auditor administers the College’s internal audit functionis through careful analysis and critical review of both financial and operating data. In some casesthis will be accomplished through the comparison of current balances with those from priorperiods. Another common technique which will be utilized while performing analysis and reviewactivities is the breakdown of individual accounts into their most refined detail so that unusual orsignificant items are more likely to be highlighted and thus selected for investigation. Othertechniques will be used as necessary to accomplish an appropriate level of analytical reviewduring the internal audit process.III. InspectionAt his discretion, the Internal Auditor shall have the authority to inspect physical assets,documents, and other evidence supporting relevant data of the auditor under review. This processis usually accomplished by verification of transactions employing the following basic audittechniques:137
    • • Vouching—this is the verification of entries by comparing them to the original documents onwhich they are based. This technique helps ensure the accuracy, genuineness, validity, or truth ofthe entries under review.• Recompilation—this is the process of recalculating selected calculations to determine theiraccuracy. In applying this technique an auditor’s footings, adding machine tapes, andspreadsheets shall never be assumed to be correct.• Retracing of Bookkeeping Procedures—this includes tracing postings from original books ofentry to ledgers and vice-versa.• Physical Examination and Count—this technique is used to substantiate the reliability of therecords under examination. In applying this technique, the Internal Auditor shall: (A) identifywhat is being examined; (B) determine the existence of the items being examined; (C) determinethe condition of the items being examined; and (D) verify the quantity of the items beingexamined.IV. ConfirmingThe validity of items shown on College records may be established by receiving confirmationdirectly from a third-party in a position to verify the validity of a given item. Requests for suchconfirmations must be mailed by the Internal Auditor and are to be accompanied by a returnenvelope addressed to:V. ScanningThis is the process of quickly but carefully scrutinizing a ledger account, document, or any otherrecord for questionable, unusual, or improper items. Scanning will be used in the internal auditprocess whenever it is determined that this process has a reasonable chance of adding value.VI. PlanningDuring the planning portion of the audit, the auditor notifies the client of the audit, discusses thescope and objectives of the examination in a formal meeting with organization management,gathers information on important processes, evaluates existing controls, and plans the remainingaudit steps.VII. FieldworkThis is very critical step as it allows auditor to determine the scope and extent of audit effort. It isdone in advance of detailed testing and analysis work. The auditors can familiarize themselveswith the system and control structure. Typically the audit team would consider:• The organizational structure and the responsibilities of key members.• Manuals of policies and procedures and applicable regulations.• Management reports and minutes of meeting.• Walkthrough of activity• Discussions with key personnelThe field survey is the initial contact point and might take one or two days depending on the sizeof the audit. The completion of field survey helps the auditor to understand key systems and138
    • processes. If the information during preliminary audit planning is imperfect, the audit team canmake adjustments to planned audit scopeVIII. Announcement LetterThe client is informed of the audit through an announcement or engagement letter from theInternal Audit Director. This letter communicates the scope and objectives of the audit.IX. Initial MeetingDuring this opening conference meeting, the client describes the unit or system to be reviewed,the organization, available resources and other relevant information. The internal auditor meetswith the senior officer directly responsible for the unit under review and any staff members she/he wishes to include. It is important that the client identify issues,X. Preliminary SurveyIn this phase the auditor gathers relevant information about the unit in order to obtain a generaloverview of operations. She/He talks with key personnel and reviews reports,XI. Internal Control ReviewThe auditor will review the units internal control structure, a process which is usually time-consuming. In doing this, the auditor uses a variety of tools and techniques to gather and analyzeinformation about the operation. The review of internal controls helps the auditor determine theareas of highest risk and design tests to be performed in the fieldwork section.XII. Audit ProgramPreparation of the audit program concludes the preliminary review phase. This program outlinesthe fieldwork necessary to achieve the audit objectives.XIII. Transaction TestingAfter completing the preliminary review, the auditor performs the procedures in the auditprogram. These procedures usually test the major internal controls and the accuracy and proprietyof the transactions.XIV. Advice & Informal CommunicationsAs the fieldwork progresses, the auditor discusses any significant findings with the client.Hopefully, the client can offer insights and work with the auditor to determine the best method ofresolving the finding. Usually these communications are oral.XV. Audit SummaryUpon completion of the fieldwork, the auditor summarizes the audit findings, conclusions, andrecommendations necessary for the audit report discussion draft.XVI. Working Papers139
    • Working papers are a vital tool of the audit profession. They are the support of the audit opinion.They connect the client’s accounting records and financials to the auditor’s opinion. They arecomprehensive and serve many functions.XVII. Audit ReportOur principal product is the final report in which we express our opinions, present the auditfindings, and discuss recommendations for improvements. To facilitate communication andensure that the recommendations presented in the final report are practical, Internal Auditdiscusses the rough draft with the client prior to issuing the final report.XVIII. Discussion DraftAt the conclusion of fieldwork, the auditor drafts the report. Audit management thoroughlyreviews the audit working papers and the discussion draft before it is presented to the client forcomment.XIX. Exit ConferenceWhen audit management has approved the discussion draft, Internal Audit meets with the unitsmanagement team to discuss the findings, recommendations, and text of the draft. At thismeeting, the client comment on the draft and the group works to reach an agreement on the auditfindings.XX. Formal DraftThe auditor then prepares a formal draft, taking into account any revisions resulting from the exitconference and other discussions.XXI. Final ReportInternal Audit prints and distributes the final report to the units operating management, the unitsreporting supervisor, the Vice President for Administration, the University Chief Accountant, andother appropriate members of senior management.. The approval of the Internal Audit Director isrequired for release of the report outside,XII. Client ResponseThe client has the opportunity to respond to the audit findings prior to issuance of the final reportwhich can be included or attached to final report. However, if the client decides to respond afterwe issue the report, the first page of the final report is a letter requesting the clients writtenresponse to the report recommendations.XXIII. Client CommentsFinally, as part of Internal Audits self-evaluation program, we ask clients to comment on InternalAudits performance. This feedback has proven to be very beneficial to us, and we have madechanges in our procedures as a result of clients suggestions.XXIV. Audit Follow-Up140
    • Within approximately one year of the final report, Internal Audit will perform a follow-up reviewto verify the resolution of the report findings.XXV. Follow-up ReviewThe client response letter is reviewed and the actions taken to resolve the audit report findingsmay be tested to ensure that the desired results were achieved. All unresolved findings will bediscussed in the follow-up report.XXVI. Follow-up ReportThe review will conclude with a follow-up report which lists the actions taken by the client toresolve the original report findings. Unresolved findings will also appear in the follow-up reportand will include a brief description of the finding, the original audit recommendation, the clientresponse,XXVII. Internal Audit Annual Report to the BoardIn addition to the distribution discussed earlier, the contents of the audit report, client response,and follow-up report may also communicated to the Audit Committee of the Board as part of theInternal Audit Annual Report.XXVIII. The Process: A Collaborative EffortAs pointed out, during each stage in the audit process--preliminary review, field work, auditreports, and follow-up--clients have the opportunity to participate. There is no doubt that theprocess works best when client management and Internal Audit have a solid working relationshipbased on clear and continuing communication.As a result, client can help evaluate the feasibility of making further changes or modifications inyour operations.Criteria examples• Ensures that all incomes are properly computed and received as at when due• Ensures that all payments are disbursed appropriately in accordance with laid down accountingprocedures.• Ensures that laid down limits of authority are consistent applied.• Ensures that all deductions are accounted for as at when due• Ensures that the Centre complies with all statutory and international regulations governing NonGovernmental Organizations.• Regularly seek improvements on the accounting process• Ensure that all identified errors and/ or weakness are corrected without delay.• Ensure that all stores items are received into the store after due ascertainment.• Ensure that all stores cards are posted regularly and up to dateSOLUTION: If an internal auditor follow the ”WAK” Model way and he/ she can alwaysworked smoothly and achieve the solution of audit program141
    • Original auditors have a huge advantage over those who lack this expertise. Internal auditingdepartments should train auditors to be inspired and promote a culture where vision additions. Onan individual basis, auditors can differentiate themselves by proposing new and innovativeapproaches to many aspects of their tasksAuditors should be passionate, even obsessed, about planning. Unfortunately, most auditors donot naturally possess this enthusiasm, so adequate time needs to be budgeted for planning, andperformance evaluations or incentive programs should reward those who devote time to planning,especially when time is limited. Internal auditors are expected to have a thoughtful audit plan, anexcellent working relationship with management, support from the audit committee, and state-of-the-art audit tools. But unless the right people are in place, many internal audit departments wontbe able to solutionCONCLUSION: The internal auditor’s are provide a variety of examine of an organizations, buttheir role of an organization is most major service contract with an self-determining auditing toExpress an opinion on the adequacy of policies and procedures within the service Organizationthat may affect the internal control environment at the client organizationThe Board appreciated the role of the Internal Auditor when auditing is a technique used byfulfills the organization to evaluate its effectiveness, efficiency, and nature of its operations andreport to appropriate Persons the results of the evaluation along with recommendations forimprovement. The objectives are to assure management that its goals are being carried out andwhether or not they are able of being improved,“WAK “ model is this process that express to whole internal auditing that is based on soundplanning and an atmosphere of constructive involvement and communication between the clientand the auditor. How the audit process works. It also is designed to provide a resource for sharingtools and techniques for each of the distinct phases of the audit process.142