Audit Surveys and Programs

Internal & Performance Auditing

by David R. Hancox, CIA, CGFM

Audit Surveys & Audit Programs – Week 7 ©

 

  1. Preliminary Survey

    • Establishes the feasibility of the assigned project
    • Defines the area as one of significant risk – that warrants the auditors attention
    • Determines the objectives are attainable
    • Determines the planned procedures are workable
    • Contrast overall audit survey leading to annual audit plan vs. audit plan for each audit
  2. Top-Down Approach vs. Bottom-Up Approach
    • Bottom-Up Approach
      • Procedures
      • Transactions
    • Top-Down Approach
      • Results
      • Objectives
      • Controls
  3. Blank Mind Approach vs. Skeptical Approach
    • Blank Mind
      • No Opinion
      • No thoughts about wrong doing
    • Skeptical Approach
      • Scientific Theory
      • Have a Hypothesis and test it
  4. Elements of Preliminary Work
    • Overview
      • Assessing Risk – Inherent, Control, Detection – audit will have impact (cost savings etc.)
      • Defining objectives
      • Reviewing pertinent department and organization files
      • Defining criteria to be used in evaluation
      • Researching authoritative literature
      • Interviewing Management
      • Preparing or modifying audit tools
      • Coordinating Efforts
      • Developing the Audit Plan

      This is a dynamic process that seeks to obtain as much information as possible to make informed decisions.

    • Routine vs. Non-routine Efforts
      • Defining Objectives
        • Recurring Audits
          • early definition minimizes confusion, avoid wasting time
        • Non-recurring Audits
          • Objectives must fill management’s needs
          • Objectives must be feasible
          • Objectives should be articulated clearly and understood by all parties.
    • Reviewing Pertinent Department and Organizational RecordsWith Respect to the agency to be audited:
      • Organization structure
      • Names and Titles of Personnel involved in area
      • Nature of the product or service provided
      • Goals and objectives of the unit to be audited
      • Procedures and methods of recordkeeping
      • Trends in operating results
      • Reports of accomplishments
      • Business Plans
      • Budgeting Performance
      • Management Concerns
      • Operational Difficulties
      • Tour – ObservationsWith Respect to the Audit approach:
      • Workable objectives
      • Audit Procedures that might be used
      • Analytical techniques
      • Nature and extent of testing
      • Tentative Time Requirements
      • Potential Problem areas
      • Staffing considerations
    • Researching Authoritative Literature
      • Library searches
      • Past news articles
      • Industry magazines
      • Government publications
      • Internet Searches
    • Defining Criteria to be used
      • Without proper criteria – the audit is fundamentally flawed
      • Enabling legislation
      • Goals and standards
    • Interviewing management
      • Gain information on policies and practices
      • Agree on audit objectives
      • Coordinate timing of audit
      • Obtain assistance if needed
    • Audit Tools
      • Audit Program
      • Questionnaires – checklists
      • Audit Software
      • Sampling considerations
    • Developing the Audit Plan (Planning Memo)
      • Must justify why we are going to allocate scarce resources to a particular area
      • Some assessment of risk should be available
      • Reasonable assurance – cost/benefit
  5. Audit Programs
    • A detailed plan of action for the work of the auditor
    • Provides a guide for the field work
      • Tells the auditor:
        • What work to perform
        • To what extent to perform it
        • In what order and when it should be performed and by whom
        • How much time is to be spent doing it
    • It is the link between the survey and the field work – prepared after survey and audit plan
    • Program Format:
      • Individual design
      • Pro-forma – “canned audit programs”
      • All programs should be flexible enough to allow for auditors to exercise professional judgment
    • Benefits:
      • Systematic Plan – allows for agreement by staff and supervisors
      • Provides a basis for assigning work
      • Provides a means of controlling and evaluating the progress of work
      • Allows for comparison of what was performed to what was planned
      • Assists in training inexperienced staff members
      • Provides a summary record of work done
      • Aids in subsequent audits
    • Timing:
      • Prepared after the survey – but always subject to change and addition
    • Audit Scope:
      • As defined by the audit standards:
        • Reliability and integrity of information
          • Accurate, reliable, timely, complete, useful
        • Compliance with policies, plans, procedures, laws and regulations
        • Safeguarding assets
          • Theft, fire, improper use
        • Economical and efficient use of resources
          • Underutilized facilities
          • Nonproductive work
          • Procedures which are not cost justified
          • Overstaffing or understaffing
        • Accomplishing established goals and objectives
          • Economical: Prudent management, use to best advantage without waste
          • Efficient: Minimizing loss or energy when producing something
          • Effective: able to accomplish something
    • Preparing Audit Programs:
      • Background – so the auditor knows what is need to be done
      • Objectives, risks and controls
      • Be specific: What does “determine whether adequate competition was obtained” mean? Determine if 3 written bids were obtained.
      • Include auditor doing work, date completed, reference to specific workpapers

Homework

  1. Read Chapter 9 in Government Performance Audit in Action.