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Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
Wahid’s opinion   non-conformity among the performance audit and financial audit (part 01,& 02)
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Wahid’s opinion non-conformity among the performance audit and financial audit (part 01,& 02)

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  • 1. WAHID’S OPINION - NON-CONFORMITY AMONG THE PERFORMANCE AUDIT AND FINANCIAL AUDIT ( PART 01,& 02) Summary: This article Wahid’s opinion I have tried to express about the non-conformity among performance audit and financial audit as angle of my view, the financial audit; disbursements, receipts, and miscellaneous financial transactions. In performance audit assessing the economy, efficiency and effectiveness in the use of human, financial and organization unit, The auditor must work within economic limits; the opinion, to be economically useful, must be formed on selected tests rather than an attempt to verify all transactions. Because evidence is examined on a test basis only, an audit provides only reasonable assurance, rather than absolute guarantee. Introduction: In general, the auditing function involves “a systematic examination of accounts or programmatic activities, so as to ascertain their accuracy a means of verifying the detailed transactions underlying any item in a record, a governing body connects audit professionals to achieve an independent assessment of expenses and programmatic action to test the placement between projected objectives and real actions. The most important scope with the professionals who achieve the work and their managerial connection to the entity being reviewed involve three primary fundamentals: 1) The external or third party role of auditors, serving between the principals who authorize legislative action and the agents who carry it out; 2) The observance to proficient values at every stage of the procedure; and 3) The organization of its center, where the auditor is bound in his or her efforts to a preliminary plan and a system for carrying the plan throughout. Suggestion: I would like to explanation my view on the clarification about the performance audit and financial audit significance parts. Earlier into describes the non-conformity among performance audit and financial audit I have tried to create clear all the parts of performance audit and financial audit for the reason. I think that the people who are related with accounts, finance, audit and also the business owners will understand individually overall about the performance audit and financial audit. For sound understanding of the performance audit and financial audit tools can be mostly helpful to WAHID THEORY & WAHID TECHNIQUES, both of the articles are a famous for grateful to gain knowledge of the performance audit and financial audit, both theory of the like MODEL for performance audit and financial audit, Wahid THEORY – for financial audit, and WAHID TECHNIQUES- for performance audit, describe in details, learner can be used the above articles as a references, What are the responsibilities of auditors? A self-determining auditor’s objective in an audit is to obtain enough capable evidential matter to provide a logical base for forming an opinion on the financial statements. In doing so, the auditor must work within economic limits; the opinion, to be economically useful, must be shaped on selected tests rather than an effort to verify all communication. Because evidence is examined on a test base only, an audit provides only logical assurance, quite than
  • 2. absolute assurance, that financial statements are free of material misstatement. Thus, there is a risk that audited financial statements may contain undiscovered matter errors or irregularities. The survival of that risk is hidden in the express in the audit report, “in my opinion.” PERFORMANCE AUDIT: Definition of Performance audit – an activity assessing the degree of economy, efficiency and effectiveness in the use of human, financial and material resources at a level of organization unit, organization, or certain actions. This type of internal audit examines processes and systems of an audited in particular Performance audit and financial audit have much in common. These two types of audit may involve the same kind of tasks, namely the measuring and explanation of the performance of an audited. They also rely on similar data collection methods. While performance auditors have their sights on efficiency, financial auditors focus on the accuracy and correctness of accounts. However, there are some differences between performance audit and financial audit as well Performance indicator criteria: Performance indicators must be I. Meaningful, considering who the audit results are meant for (organization, managers, users, etc.), II. Well-defined, ensuring that they are easy to understand and explicitly (clearly) defined in both what they measure and where the source data should come from. They must be unambiguous to make it easier to interpret changes in measured values, III. Comparable, i.e. allowing comparisons between the present and the past, or with other organizations. In this case, standard definitions (indicators) may prove helpful, minimizing change over time; if the definitions change, performance must be re-measured both before and after change, IV. Reliable, including statistically significant (estimates based on too small sample may be exposed to dramatic changes in value) and independent evaluation of performance measuring systems which allow verification and are sensitive to changes in performance, Available: the indicators should be available and cost-efficient (data collection may be expensive), striking the right balance between data collection costs and the need to measure performance Assessment criteria should be: I. Relevant – have an obvious relation to the achievement of a given performance goal; II. Operative – specific enough for use in evaluation in practice; III. Consistent – the criteria applied in an audit must be consistent both with one another and with criteria applied in earlier similar performance audits, provided they are still valid. In developing criteria, we may refer to multiple sources. Legislation, various directives and regulations (including internal regulations of the organization), and current concept documents are the basic and least controversial sources of criteria. It is also advisable to seek the opinion of independent experts, and draw on information from professional literature and relevant foreign experience. Definition of some key terms used in performance audits: 1. Input – financial, human or material resources used to implement a public policy, 2. Objective – something an organization seeks to achieve,
  • 3. 3. Effect – the outcome or consequence of an implemented public policy measure on a target group and on others, 4. Output – the product achieved using allocated resources, 5. Economy – the state of achieving appropriate quality and quantity of inputs at the lowest possible price (in order to minimize operating cost, while ensuring adequate quality), 6. Efficiency – the state of minimizing inputs where outputs are fixed, or maximizing outputs where inputs are fixed (it is the relationship between inputs in goods, services or other activities and resources used to produce them), 7. Effectiveness – the degree of accomplishment of planned goals. Goals may be defined as outputs or effects (impacts), with results measured against objectives and resources spent to achieve those objectives, Components of a performance audit would usually include: I. Interviewing the principal stakeholders, such as political parties, II. Reviewed relevant, temporary staff or contractors engaged for the activities.; Benefits of Performance Auditing Performance Auditing provides Parliament with independent information, assurance and advice about the economy, efficiency and effectiveness in the management of public revenues and expenditures. It also helps the management of the audited entities to streamline their processes and control for ensuring economy, efficiency and effectiveness in their operations. This promotes public accountability on the performance of state and state-financed activities. Upon consideration of these findings, Parliament might make a reassessment of priorities which may even involve policy changes at the highest level Performance Auditing contributes in: •Drawing attention to obstacles to the effective and efficient use of public resources; •Providing Parliament and Ministries with a basis for making policy and other decisions, concerning improved effectiveness measures; •Encouraging the public sector management to introduce processes for reporting on performance to contribute to more accountability. The function of Performance Auditing is: “To balance financial auditing through ascertaining how carefully public operations were undertaken - that is to say, to what scope intended results and effect have been achieved.” The goal of Performance Auditing is “to promote effectiveness in the operation of public assets based on three essentials: economy, efficiency and effectiveness Why the need for Performance Auditing? Performance audit is an improvement on the predictable financial and transactional audits that were being conducted by auditors worldwide. Its objective is to engage more closely with the auditee organization to found a formal process to use audit evidence to enable the public auditor to form an opinion and thereby to communicate to the auditee the scope to which that agency has utilized its resources in an economic, efficient and effective manner. In this process of expressing an opinion, the auditor will report on the degree of compliance to existing financial regulations. This necessitated the approval of Performance Auditing across many governments the world over, in order to widely address these issues. This shortcoming in the financial audit was compounded by the global trend of taxpayers and donors demanding greater accountability and transparency in the utilization of their resources. Therefore, governments became compelled to account for not only the use of these
  • 4. possessions as planned but to also give assurance that they were utilized in the most economic, efficient and effective manner FINANCIAL AUDIT: Definition of financial audit: Financial statements are to be “duly audited by a professional accountant or by two skilled persons”. There are essentially two reasons for this necessity. The first is to provide a second look at the financial information that is being accessible to the worshippers at the annual meeting. It is corroboration that information being offered exactly reflects the true financial picture of the corporation. In this sense the audit is of benefit to the parish. The second reason for an audit is to provide treasurers with assurances that their work is correctly represented in the financial statements. In this sense the audit is of benefit to the Treasurer, as an officer of the corporation. Audit is the examination of records and reports of a company, in order to check that what is provided is relevant and accurate. That is to say, all assets and liabilities are properly recorded in the balance sheet, and, all profits and losses are properly assessed. This assessment is done through 2 methods, by assessing internal control procedures and by checking the consistency of items. The audit work is conducted in accordance with Generally Accepted Accounting Principles (GAAP) and includes those reviews of internal controls, tests, and verification of data and other activities deemed necessary by the auditor. Typically, annual financial statements are subject to audit while interim statements are not. the auditor finds audited transactions as being either "right" or "wrong", "legal" or "unacceptable", etc.. These assessment criteria used by the auditor to arrive at a final opinion (at the end of the audit) tend to be relatively closed and usually pre-defined, for example by legislation. Performance audit differs from financial audit in many aspects, both in theory and practice (objective, focus, academic basis, methods, criteria, valuations, final report). The audit is not a “questioning” of the integrity of the treasurer, nor does it reflect a concern over the veracity of the financial statements. It is simply a device to provide independent opinion on the statements themselves. There are essentially three areas that the audit will focus on; disbursements, receipts, and miscellaneous financial transactions. There is also a degree to which an audit can look at the administrative operation of the community in general although that may be beyond the scope of the audit envisioned in the Canon. Directions of financial audit: Moving out an audit does not involve doing the treasurer*s works over again. Nor does it entail a check of every single business the treasurer has recorded. It is essential for the auditors to do checks on random samples of business. This may mean choosing certain months and doing an exhaustive check on business processed in those months. It may include a detailed check of certain types of business such as all offering deposits and copy of same. It may be that the auditors will divide the work with one doing disbursements, another doing receipts. The significant point is that no matter what form or scope the audit takes it must be more than a perfunctory effort. It must be detailed enough to be reliable and systematic enough to provide the preferred level of assurances that are understood in the set. Importance financial audit criteria:
  • 5. I. Given the nature and the amount of the transaction, was approval to initiate it given by the proper authority. II Was the transaction entered into the financial system to commit the funds III. Was the transaction initiated in connection with Project? IV. Has a delegated authority declared that goods have been supplied, services have been rendered, or work has been performed, and that the price and the proposed schedule of payments are in accordance with the contract? V. Was the invoice date-stamped when it was received by the Department? VI. At the time of hiring, did the employee meet security, language and educational requirements, etc? VII. Was the staffing action approved by the appropriate delegated authority? (Financial authority) Type of financial audit: An audit in general is a review. The audit process involves a careful examination for the purpose of verification. 01. A financial audit is a review of company financial operation. A financial audit is usually performed by a CPA firm's auditing division. 02. A tax audit is a review of tax information, for the purpose of verifying that taxes have been paid correctly and in full. Tax audits are performed by a taxing entity, including the Internal Revenue Service (IRS) for federal income taxes, state sales tax agencies, or other taxing entities. 03. Regulatory audits and investigations are performed by regulatory agencies, such as a state wage and hour or state labor department, to verify that a business is complying with state employment laws, such as those regarding minimum wages, payroll records, and payment of overtime. Scope of financial audit: Office of the Auditor General (OAGI) published the findings of a financial audit conducted for 4 ADB; it was subsequently removed pending further investigation by the auditors. Further work of the auditors included: •Interviewing the complainant, •Reassessing the initial audit findings based on the outcome of that interview and in the light of new evidence received (if any), and •Reissuing a revised audit report. The revised audit report published here incorporates the results of the auditor's further work. Major revisions and/or additions to initial audit findings include the following: •There was non-compliance with respect to one of the projects wherein office space was hired, when in fact the Executing Agency was to have provided the space. •Required approvals for changes in the scope of the projects were only obtained and granted after modified tasks were executed. Objective of Financial audit The primary objective of financial audit is to examine financial statements in terms of preciseness, clarity and completeness of information of the reflected actions. This will serve
  • 6. as a basis to give an accountable and independent opinion.. When financial audits were first introduced, their aim was to verify whether or not the financial reports of agencies give an adequate overview of their actual financial situation. For the first time this year, the Office also provides an assessment of the legality of the transactions performed by agencies. The audit objectives constitute the expected results after considering financial statements. The objectives of the audit planning are: • Meeting the SAI legal objectives and other audit priorities; • Identification of the aim, objectives and expected results from the audit • Obtaining and analyzing the audit evidence • Identification of the requested resources, including the financial and time costs; All Ministries are subject to annual auditing while their more important divisions, as well as constitutional institutions, are audited selectively. The agencies subject to selective evaluation are actually audited on a regular basis to guarantee that all the largest and most important agencies are supervised. In addition to the above, the correctness of other reports (e.g. on health insurance and pensions) used for providing an opinion on the consolidated annual report of the state is verified. The Objective of the preparation of an audit plan is to develop an audit approach that ensures the collection of proper and sufficient evidence to support the audit conclusions. Although every stage of the audit is documented, we must take account of the fact that they are interrelated and planned to contribute to the overall planning objectives. The financial audit covered area represents the audited areas with the aim of meeting the audit objectives. Objectives of financial audit include: • Lawfulness and Regularity, operations (transactions) are performed in accordance with the laws and by-laws in place and within the envisaged budgetary limits; • Completeness, operations (transactions) are properly recorded in account books in line with the existing legislation; • Truthfulness of operations, operations (transactions) recorded in financial statements are done efficiently, relevant to the audited body and referring to the audit period; • Evaluation all transactions are precisely evaluated and recorded, as well as being compliant with the existing legislation. • Acceptance and Reporting, transactions have been classified with reference to the structure and definite reporting in line with the specialist regulatory authority directions. Determining Materiality “In universal terms, a matter may be judged material if information of it would be likely to influence the user of the financial statements audit report”. In the light of financial audit, the auditor’s aim is to assess the overall error rate, misstatements and whether it can by subject to a judgment as material misstatement that attracts the notice to the users of these financial statements. Materiality can be defined as:
  • 7. The auditor wants to make sure that the financial statements do not contain any errors or misstatement. Errors or irregularities of financial statements can be considered as material if the users of these statements could be affected. 1 Materiality by value, in monetary units; 2 Materiality by nature is significant by its very nature; 3 Materiality by context, although is irrelevant in terms of nature and value it brings about deviations from the accounting definitions. Need for financial audit: Audit has some specificity throughout the world but has some mains components. One of the main problems in audit is the conflict between the need to control a company and the business relationship. On one hand, the audit company has to check thoroughly the books, the audit work is conducted in accordance with Generally Accepted Accounting Principles (GAAP) and includes those reviews of internal controls, tests, and verification of data and other activities deemed necessary by the auditor. But on the other side, it has to keep its customer that is its source of revenue. In practical terms, this means that the audit company will try to protect itself by carrying out the minimum checks, but if it has a slight doubt, Below discus the main three part of financial auditing necessity, if any one read this three part he/she will be able to understand how much necessity of financial auditing in an organization, Circularization : To make sure that the amount for each bank account specified in the trial balance are right, auditors send a request to every bank of the business to get the current balance at the closing date. Banks typically mention the debts incurred by the company, current guarantees and people who have the power to transfer fund to and from the bank accounts. Financial interests: The principle is to endorse the amount of financial interest charges and revenues. Usually, auditors perform a global test by cunning the average interest rate and the credit and debit balance during the year. Debtors Circularization: Auditors choose a sample of the largest debtors (using statistical sampling software) and send letters to those debtors requesting that they agree or disagree the balance, with an explanation. Due to some customers being reluctant to respond to such letters, especially where elements of balances are in dispute, this testing is usually combined with a review of cash receipts after the balance sheet date - in order to provide more substantive evidence that the balance sheet debtors figure is correct.
  • 8. Wahid’s Opinion – (non-conformity among the performance audit and financial audit Part - 02) Auditing is a process involving the examination of data, statements, records, operations and performance of an auditor for a stated purpose. Performance auditing goes beyond the consideration of promptness. It aims to determine to what extent the audited has discharged its financial or other responsibilities which imply assessment of the auditor’s operation in terms of the economy in acquiring resources, efficiency in using resources and effectiveness in achieving objectives. In additional: Financial audits seek to express a sovereign opinion on the accuracy and sprite of an organization’s financial accounts. They check compliance with appropriate accounting principles. Performance audits do not observe an organization’s financial accounts. as an alternative they seek to say an opinion on how economically, efficiently or effectively an organization undertakes its functions. They intend to add worth and develop the performance of an organization The major non-conformity in the approach, scope and objectives among financial audits and performance audits are few examples presented in the following table. Through compare with financial audit performance audit involves, More opinion and analysis more careful exposure criteria for assessment are not pre-defined verification tends to be at best persuasive, rather than definite reports contain more discussion and reasoned argument Also in this bases thy have some non-conformity : a) Study selection stage b) Study design Stage c) Consulting the audited entity d) Team work Financial Auditing Performance Auditing: • Financial Audit: Uses financial data to express an opinion on financial position and compliance with existing rules and • Performance Audit: Uses financial as well as non-financial data to assess economy, efficiency and effectiveness in Regulations and determines whether: • Financial Audit: :the financial statements of the auditor fairly present the financial position, reflect results of operations and cash flows or manifest changes in financial position in accordance with generally accepted accounting principles; • Performance Audit: the auditor has complied with laws and regulations for those transactions that may have a material effect on financial statements. The management of resources and determines whether: Objectives : • Financial Audit: to obtain sufficient, competent evidential matter to enable the auditor to form and express an opinion on the auditor’s financial report; • Performance Audit: to promote compliance with laws, regulations, agreements, directives, policies and procedures as necessitated by statutory and/or auditor requirements; 
  • 9. Financial Audit: to encourage application of generally accepted accounting principles; Performance Audit: to establish confidence in the reliability and integrity of the financial management system and the reports generated by it. Other objectives are: • Financial Audit: provision of a basis for improvement of public sector management of all resources; • Performance Audit improvement of the quality of information on the results of public sector management that is available to policy makers, legislators and the general community; Regulations: • Financial Audit: Aims to strengthen control environment to reduce noncompliance. • Performance Audit: Aims to improve overall performance capability to encourage better management of Resources. • Financial Audit: promptness and respectability are major aspects. • Performance Audit: Economy, efficiency and effectiveness are major aspects. Conclusion: I want to make the all of reader student & auditors understand my imagination through the Wahid opinion. I am sure that this opinion is the perfect to understand the non-conformity among performance audit and financial audit of any companies & organization audit When financial audits are first introduced, their aim was to verify whether or not the financial reports of agencies give a satisfactory impression of their actual financial position. For the first time this year, the Office also provides a measurement of the authenticity of the business performed by agencies. The scale of financial auditing will be additional complete to assess expenditure information, financial management, internal control systems and the correctness of data provided by management information A good performance audits we need to correspond more effectively with the people at large. This can be done both while defining the scope of our audit as well as after completing the audit. In a recent performance audit we invited inputs from the people by inserting advertisements in newspapers. This creates awareness of the work being done by us, on the one hand, and gives us new insights in to the issues that affect the people. We have also been distributing basic, illustrated summaries of our performance audit reports to connect the thought of readers who may not find the conventional form of our exposure exciting sufficient. About The Author:
  • 10. Mohammad Wahid Abdullah Khan (MBA, CPFA, CPIA, CFC) Dhaka, Bangladesh Home Page: http://wahidbd.page4.me MOHAMMAD WAHID ABDULLAH KHAN Dhaka, Bangladesh, is a PhD Candidate in "Criminal Psychology" as well he is “freelance Author, online columnists, Human psychoanalyst, industrial psychotherapist, Certified Financial Consultant, & Certified Forensic Accountant, too dynamic entrepreneur, utilize creativity leadership and teamwork to design and execute solutions that creates customer value. Moreover Mr. Khan is CEO & Certified Consultant of” Wahid & co, Wak Business Solutions, Wak Business Support, “Wam Associates” & leader of the” Wahid Consulting Group”; Prior to consultancy Mr. Wahid has fulfilled more than 14 (fourteen) years working in various fields of Business like - Accounts, Finance, Auditing (Internal & External Audit), Project budgeting and Project costing related positions in some of the largest group & join venture companies in Bangladesh. Which experience encouraged him to work as a “professional consultant” from a few years, Mr. Khan is realistic and implements his assignment within the bounds, objectives and capabilities of the organization. His extraordinary quick understanding of strategic options helps find direction and supports management in decision making. He has a “doer” attitude and gets things done on the technical and functional side. As a “Consultant” Mr. Wahid believe that his study & physiological motivation is very strong, as well my confident level is high & my quantitative skills are well-built also he is crystal clear about my every single goal which helped me to be a very tough contestant “Consultant” in the business consultant arena Professional Membership: • Associate Member – Institute of Management Consultants Bangladesh (IMCB) •Member- Association of Proposal Management Professionals® (APMP®) • Member – The Next level Purchasing Association. •Member- The Chartered Institute of Personnel and Development (CIPD) • Member - The Professional Risk manager’s international Association (PRMIA) • Affiliate Member- Global Association of Risk Professional (GARP) • Member - The International Association of Risk and Compliance Professionals (IARCP) • Lifetime Member - Dragon fire martial arts association “International” (DFMAA) • Individual Member: License Logic LLC • Associate Membership - The American Psychological Association (APA) • Member - The Global Community of Information Professionals

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