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Teaching Auditing Students About Internal Controls

From an Internal Audit Perspective

Susanne O’Callaghan, Ph.D., CPA, CIAAssociate Professor of Accounting

Pace University

Lubin School of BusinessOne Pace Plaa

!e" #or$, !# %&&'(

socallaghan)*ace.e+u

ohn P. -al$er, Ph.D., CPA

Professor of Accounting

ueens College / CU!#

012'& 3issena Blv+ueens, !# %%'04

5*v"al$er)aol.co6

7ay6on+ . 8lson9, DBA, CPA

Assistant Professor of Accounting:al+osta State University

Lang+ale College of Business

:al+osta, ;A '%0<(

relson)val+osta.e+u

* Corresponding author

%

mailto:[email protected]








Teaching Auditing Students About Internal Controls

From an Internal Audit Perspective

IntroductionIn the Sarbanes2O=ley era there is a real nee+ for a goo+ un+erstan+ing of the

+ifferent res*onsibilities an+ reliances that can be *lace+ on the "or$ of others. 8=ternal

au+itors 6ust have a goo+ co6*rehension of the ty*es an+ e=tent of "or$ that internalau+itors +o. Since 6ost universities +o not *rovi+e a stan+2alone course on internal

au+iting, stu+ents 6ust rely on "hat they learn in the 6ainstrea6 au+iting class to obtain

their un+erstan+ing of "hat an internal au+itor +oes. >his *a*er *rovi+es au+iting

instructors a vehicle for teaching the nee+ for, an+ the a**roach to, ho" internal au+itors+o their 5obs.

Background?any accounting stu+ents "ill enter the au+iting *rofession u*on gra+uation.

>hey "ill enter the e=ternal au+iting *rofession, the internal au+iting *rofession or "or$in organiations "here they interact "ith all ty*es of au+itors. If these stu+ents enter the

e=ternal au+iting *rofession, they "ill be e=*ecte+ to interact an+ un+erstan+ "hat

internal au+itors +o in or+er to rely on the internal au+itors "or$ un+er SAS 01 @>heAu+itor’s Consi+eration of the Internal Au+it unction in an Au+it of inancial

State6ents an+ PCOAB Stan+ar+ !o. . But it is +ifficult for au+iting stu+ents to

un+erstan+ "hat value the internal au+it function brings to the table as 6ost au+iting

te=tboo$s have only one cha*ter on internal au+iting. >hat cha*ter is usually very vagueas to "hat an internal au+itor actually +oes. >his *a*er *rovi+es a si6*le a**roach to

un+erstan+ing conce*ts surroun+ing the internal au+itors’ role in evaluating internal

controls so that their e6*loyer 6eets the ob5ectives.

Literature evie!

>here is very little literature that offers a *e+agogical a**roach to teaching

internal au+iting. ernan+es %<<EF recognies that accounting e+ucation *re*ares

stu+ents "ell for financial au+iting. Ge ac$no"le+ges that the tra+itional au+iting course

6ay trigger an interest in internal au+iting on the *art of the stu+ent but the stu+ent is basically left to figure out "hat internal au+iting is all about. >hese sa6e stu+ents are not

a+eHuately *re*are+ in the areas of business analytical techniHues an+ there is a voi+ in

general au+it e+ucation because of this. Ge feels that all universities "ith business an+ *ublic a+6inistration *rogra6s shoul+ offer at least one course +evote+ to internal

au+iting.

Another article by ernan+es, Po*os$y an+ Savage %<<1F *resents the

+evelo*6ent of an internal au+it course curriculu6. >he author e=a6ines an+ i+entifies

course ob5ectives that "oul+ enhance the stu+ents’ un+erstan+ing of both the conce*tual

an+ *ractical as*ects of the internal au+itor function. >hey also i+entify ele6ents of a



curriculu6 that "oul+ enhance stu+ents’ analytic, critical thin$ing, "ritten an+ oral

co66unication, an+ grou*tea6"or$ s$ills. >his article lays out +etaile+ ob5ectives,

6etho+s of instruction, *rofessional co6*any involve6ent an+ course evaluation but+oes not go into any +etail of content.

;reensa"alt an+ Stinnett %<<F *resent an e=cellent case that can be a+a*te+ foruse in a financial au+iting or internal au+iting class. It reHuires stu+ents to fin+ an @au+it

client. >he stu+ents then have the tas$ of un+erstan+ing an+ +ocu6enting the internal

control syste6 of either the revenue cycle or the e=*en+iture cycle. >he stu+ents *resent a"ritten re*ort an+ +ocu6ent their un+erstan+ing of the controls, *re*are an internal

control revie" 6atri=, +o evaluations an+ 6a$e oral *resentations. >his article *rovi+es a

great outsi+e *ro5ect but +oes not *rovi+e the au+it instructor an in2class +e6onstration of

ho" a control 6atri= is *re*are+.

Our *a*er *rovi+es a uniHue *e+agogical a**roach to teaching au+iting stu+ents

ho" to construct a control 6atri=, an i6*ortant tool for use in evaluating internal

controls.

The elationship bet!een Internal and "#ternal Auditing

Internal au+iting is an in+e*en+ent, ob5ective, assurance an+ consulting activity

+esigne+ to a++ value an+ i6*rove an organiation’s o*erations. Its focus is 6ainly onevaluating an+ i6*roving the effectiveness of the organiation’s ris$ 6anage6ent,

control an+ governance *rocesses. 8=ternal au+iting is the syste6atic *rocess of

ob5ectively obtaining an+ evaluating evi+ence regar+ing 6anage6ent assertions in

financial state6ents. Its focus is on co66unicating any fin+ings to intereste+ users "hoare 6ostly e=ternal to the organiation such as sharehol+ers an+ the S8C. Both sets of

au+iting *rofessionals have a use for control 6atrices.

The elationships among $rgani%ational $b&ectives' Threats to (eeting $b&ectives

and Internal Controls

All entities have s*ecific ob5ectives that they 6ust achieve. But all ob5ectives

have threats that 6ay threaten their achieve6ent. >hese threats 6ust be eli6inate+,

avoi+e+, controlle+ or acce*te+. By having goo+ controls in *lace to 6itigate the threats,

a co6*any is better able to achieve its ob5ectives an+ therefore *laces itself in aco6*etitive *osition. It is 6anage6ent’s res*onsibility to see that a+eHuate controls are

in *lace. It is the au+itor’s res*onsibility to see that 6anage6ent’s controls are in+ee+

"or$ing as *lanne+. >he internal au+itor’s chief role is to evaluate the +esign an+effectiveness of those controls.

C$S$ Approach to )eveloping a Control (atri#

>his *a*er illustrates a control 6atri= a**roach that can be use+ as lecture

6aterial or as a class assign6entF in the internal au+iting cha*ter of a tra+itional

te=tboo$ or as *art of an internal au+iting course. >his control 6atri= hel*s stu+ents

'



un+erstan+ ho" organiation ob5ectives +rive the nee+ for controls. A COSO fra6e"or$

is use+ as the basis for the control 6atri= +evelo*6ent.%

>he COSO internal control fra6e"or$ states that entities have three ob5ectivesJ

goo+ o*erations, co6*liance "ith rules an+ regulations an+ goo+ financial re*orting. But

there are e=ternal an+ internal threats to having goo+ o*erations, being in co6*liance"ith rules an+ regulations an+ having goo+ financial re*orting. >o achieve organiational

ob5ectives an+ 6ini6ie the threats, an entity 6ust have a goo+ internal control syste6 in

*lace. >hat syste6 shoul+ consist of five ele6ents. >he entity 6ust have a goo+ controlenviron6ent, ris$ assess6ent *roce+ures, e=cellent control activities, a+eHuate

infor6ation an+ co66unications an+ a 6onitoring 6echanis6 in *lace.

Au+iting stu+ents have alrea+y learne+ about COSO in an earlier cha*ter oninternal control so this is a Huic$ internal control revie" for the6. In the internal au+iting

cha*ter "e 6ove into a 6ore +etaile+ +iscussion of the internal au+itors’ role in

evaluating internal controls *ut in *lace by 6anage6ent an+ in the value2a++e+ services

that internal au+itors *erfor6. But there are fe" e=a6*les to really hel* stu+entsinternalie "hat internal au+itors +o.

Since 6ost stu+ents have so6e un+erstan+ing as to ho" restaurants o*erate, "e

use+ a restaurant e=a6*le to illustrate this a**roach to teaching internal au+iting. -e use

the COSO fra6e"or$ an+ a si=2ste* *rocess to create the control 6atri=. -e firstillustrate the three ob5ectives of a restaurant. Secon+, "e i+entify threats to 6eeting those

restaurant ob5ectives. >hir+, "e +iscuss control ob5ectives necessary to see that the threats

are containe+. ourth, "e use the five co6*onents of a goo+ internal control syste6 to

6eet the control ob5ectives. ifth, "e then e=a6ine the various control activities that6anage6ent coul+ have in *lace. Lastly, in the si=th ste*, "e i+entify ste*s to be ta$en

by the au+itor to assure that control ob5ectives are 6et.

Teaching Approach

>he 6atri= that follo"s can be create+ by the au+it instructor by first filling in thefirst colu6nJ the three ob5ectives i+entifie+ by COSOJ o*erations, co6*liance "ith rules

an+ regulations, an+ 6onitoring >able %.F

% >he Co66ittee on S*onsoring Organiations *ublishe+ the COSO fra6e"or$ in %<<. It is the 6ost

"i+ely recognie+ internal control fra6e"or$ use+ in the Unite+ States to+ay.

E



Table

estaurant $b&ective +Column ,

C$S$

$b&ectives o-"ntit

$perations

Compliance

Financial

eporting

!e=t the instructor can *resent one threat to each of the restaurant ob5ectivesK e.g.,

a threat to o*erations is that e6*loyees 6ight lose fingersK a threat to being in co6*liance

"ith rules an+ regulations is that the restaurant coul+ lose its license if it violates healthregulationsK a threat to goo+ financial re*orting is that restaurant sales 6ay not be

recor+e+ accurately >able .F

>he thir+ colu6n is co6*lete+ by i+entifying the control ob5ectives that6anage6ent has or shoul+ have in *lace to sto* the threats or e=a6*le, the o*erations

ob5ective is to sto* e6*loyees fro6 losing fingers >able '.F

>hen the instructor fills in the fourth colu6n "ith the internal control ele6ents.

>he five in+ivi+ual ele6ents of a goo+ internal control syste6 are the control

environ6ent, ris$ assess6ent, control activities, infor6ation an+ co66unication, an+6onitoring >able E.F >hese internal control ele6ents shoul+ ensure that 6anage6ent’s

control ob5ectives are 6et.

Table /

Threats to (eeting $b&ectives +Column /,

COSO Ob5ectives of8ntity

Threats to the

estaurant

O*erations "mploees !ill lose

-ingers on sharp

e0uipmentCo6*liance estaurant ma

lose its license due

to not adhering to

health regulations

inancial 7e*orting estaurant sales

!ill not be recorded

accuratel

1



Table 1

(anagement2s Control $b&ectives +Column 1,

COSO Ob5ectives of

8ntity

>hreats to the

8ntityControl

$b&ective +To

stop the

Threat3

(anagement2s

esponsibilit,

O*erations 86*loyees "ill

lose fingers on

shar* eHui*6ent

To ensure that

emploees

don2t lose

-ingers on

sharpe0uipment

Co6*liance 7estaurant 6ay

lose its license +ue

to not a+hering tohealth regulations

To ensure that

all health

regulations are

-ollo!ed so

that

restaurant

does not lose

its license

inancial 7e*orting 7estaurant sales

"ill not berecor+e+ accurately

To ensure that

all sales arerecorded

accuratel so

that the

-inancial

reporting

ob&ective is

met

>he fifth colu6n a++resses "hat 6anage6ent has tol+ the au+itor they have *ut

in *lace to 6eet the threat belonging to that internal control ele6ent. or e=a6*le, acontrol environ6ent ste* that coul+ hel* $ee* e6*loyees fro6 losing fingers "oul+ be

the e=istence of training sessions to sho" e6*loyees ho" to use the eHui*6ent. >hese are

the activities that 6anage6ent has *ut in *lace to see that the control ob5ective is 6et.>he instructor continues to i+entify +ifferent evi+ence that the control ob5ective is being

6et for each of the internal control ele6ents in colu6n E >able 1.F

0



Table 4

Internal Control "lements +Column 4,

COSOOb5ectives of

8ntity

>hreats to the8ntity

Control Ob5ective>o sto* the

>hreat2

?anage6ent’s7es*onsibilityF

Internal Control"lement

+C$S$,

O*erations 86*loyees "ill

lose fingers onshar*

eHui*6ent

>o ensure that

e6*loyees +on’tlose fingers on

shar* eHui*6ent

Control

"nvironment

Sa6e Sa6e isk Assessment

Sa6e Sa6e Control

ActivitiesSa6e Sa6e In-ormation and

Communications

Sa6e Sa6e (onitoring


lose its license

+ue to nota+hering to

health

regulations

>o ensure that all

health regulations

are follo"e+ sothat restaurant

+oes not lose its

license

Control

"nvironment

Sa6e Sa6e isk Assessment

Sa6e Sa6e ControlActivities

Sa6e Sa6e In-ormation and

Communications


inancial

7e*orting

7estaurant

sales "ill not be recor+e+

accurately

>o ensure that all

sales are recor+e+accurately so that

the financial

re*orting

ob5ective is 6et

Control

"nvironment

Sa6e Sa6e isk AssessmentSa6e Sa6e Control

Activities

Sa6e Sa6e In-ormation and

Communications


4



Table 5

"vidence That Control $b&ectives are Being (et +Column 5,

COSO

Ob5ectives of8ntity

>hreats to the

8ntity

Control Ob5ective >o

sto* the >hreat2?anage6ent’s7es*onsibilityF

Internal Control 8le6ent

COSOF

"vidence that Control

$b&ective is Being (et+(anagement2s esponsibilit,

O*erations 86*loyees "illlose fingers on

shar* eHui*6ent

>o ensure thate6*loyees +on’t lose

fingers on shar*

eHui*6ent

Control 8nviron6ent (anagement provides training

sessions -or all ne! emploees

on ho! to use e0uipment sa-el

Sa6e Sa6e 7is$ Assess6ent (anagement revie!s the

e0uipment to make sure that

an ne! e0uipment is included

in training sessions

Sa6e Sa6e Control Activities Sa-et blades are re0uired to

be kept on all e0uipment !hen

e0uipment is not is useSa6e Sa6e Internal Control

"lement +C$S$,

eminders about e0uipment

sa-et are posted near all

e0uipment

Sa6e Sa6e Control 8nviron6ent (anagement keeps logs o-

sa-et !alk3throughs to see

that e0uipment is covered

!hen not in use and emploees

are -ollo!ing sa-et

procedures.


lose its license

+ue to not

a+hering tohealth

regulations

>o ensure that all

health regulations are

follo"e+ so that

restaurant +oes notlose its license

7is$ Assess6ent (anagement has policies and

procedures on all health

regulations6 all ne! emploees

must read and sign o--.

Sa6e Sa6e Control Activities (anagement revie!s changes

to health code on a regular

basis to see i- ne! regulations

have added to their risks

Sa6e Sa6e Infor6ation an+

Co66unications

(anagement has polic that

no -ood should be le-t out o-

re-rigerator -or more than one

hour

Sa6e Sa6e ?onitoring Signs are clearl posted stating

that emploees must !ash

hands a-ter using thebathroom

Sa6e Sa6e Control 8nviron6ent (anagement goes through all

cit health inspection reports

and implements all in-ractions

inancial

7e*orting

7estaurant sales

"ill not be

recor+e+accurately

>o ensure that all

sales are recor+e+

accurately so that thefinancial re*orting

ob5ective is 6et

7is$ Assess6ent (anagement has policies and

procedures -or the proper

recording o- sales b servers

and cashiers

(



Sa6e Sa6e Control Activities (anagement conducts

0uarterl revie!s to determine

i- emploee turnover has

caused changes to the -inancial

procedures

Sa6e Sa6e Infor6ation an+

Co66unications

(anagement re0uires use o-

prenumbered server order-orms so that all meals can be

accounted -or

Sa6e Sa6e ?onitoring (anagement prepares dail

server reports to report on all

tips -or ta# purposes6 all

emploees sign -orm

Same Sa6e Control 8nviron6ent (anagement accounts -or all

prenumbered server order

-orm tickets

7is$ Assess6ent

Control Activities

Infor6ation an+Co66unications

?onitoring

But the internal au+itor cannot rely on 6anage6ent’s state6ents alone. So the

si=th colu6n illustrates "hat evi+ence the internal au+itor "oul+ as$ for to evaluate

6anage6ent’s actions to threats to the restaurant, e.g., if the restaurant’s o*erating

ob5ective is to have goo+ o*erations an+ 6anage6ent has state+ that they *rovi+etraining sessions for all e6*loyees to sho" the6 ho" to safely use shar* eHui*6ent

control environ6entF, then the internal au+itor "oul+ reHuest an+ revie" sche+ules of

*ast an+ future training sessions an+ chec$ that all e6*loyees have atten+e+ thosesessions >able 0.F

Table 7

Audit Procedures +Column 7,

COSO

Ob5ectivesof 8ntity

>hreats to the

8ntity

Control Ob5ective

>o sto* the>hreat2

?anage6ent’s

7es*onsibilityF

Internal

Control8le6ent

COSOF

8vi+ence that Control

Ob5ective is Being ?et?anage6ent’s

7es*onsibilityF

Audit Procedure

+Auditor2s

esponsibilit,

O*erations 86*loyees

"ill lose

fingers onshar*eHui*6ent

>o ensure that

e6*loyees +on’t

lose fingers onshar* eHui*6ent

Control

8nviron6ent

?anage6ent *rovi+es

training sessions for all

ne" e6*loyees on ho"to use eHui*6ent safely

Auditor re0uests and

revie!s schedule o- past

and -uture trainingsessions and checks that

all emploees have

attended

Sa6e Sa6e 7is$

Assess6ent

?anage6ent revie"s

the eHui*6ent to 6a$e

sure that any ne"

eHui*6ent is inclu+e+in training sessions

Auditor re0uests

e0uipment revie!

reports -rom

management. "#amines

ne! e0uipment. Checks

against training sessions

<



Sa6e Sa6e Control

Activities

Safety bla+es are

reHuire+ to be $e*t on

all eHui*6ent "heneHui*6ent is not is use

Auditors sample

e0uipment and inspect

to see that sa-et blades

are on e0uipment not in

use

Sa6e Sa6e Infor6ation

an+Co66unicatio

ns

7e6in+ers about

eHui*6ent safety are *oste+ near all

eHui*6ent

Auditor e#amines signs

near all e0uipment to seethat the are posted and

in good condition

Sa6e Sa6e ?onitoring ?anage6ent $ee*s logs

of safety "al$2throughs

to see that eHui*6ent iscovere+ "hen not in

use an+ e6*loyees are

follo"ing safety

*roce+ures.

Auditor re0uests sa-et

!alk3throughs logs and

determines that

comments have been

addressed

Co6*liance 7estaurant6ay lose its

license +ue to

not a+hering to

healthregulations

>o ensure that allhealth regulations

are follo"e+ so that

restaurant +oes not

lose its license

Control8nviron6ent

?anage6ent has *olicies an+ *roce+ures

on all health

regulationsK all ne"

e6*loyees 6ust rea+an+ sign off.

Auditor e#amines

policies and procedures

manual to see that

health regulations are

included and are

current6 e#amines sign

o-- b all emploees

Sa6e Sa6e 7is$Assess6ent

?anage6ent revie"schanges to health co+e

on a regular basis to see

if ne" regulations havea++e+ to their ris$s

Auditor e#amines

management2s revie! o-

ne! health codes and

evaluates conclusions

Sa6e Sa6e Control

Activities

?anage6ent has *olicy

that no foo+ shoul+ beleft out of refrigerator

for 6ore than one hour

Check -or !ritten

polic6 auditor observes

kitchen -or -ood le-t out6

auditor in0uires o-emploees to see i- the

-ollo! polic

Sa6e Sa6e Infor6ation

an+

Co66unications

Signs are clearly *oste+

stating that e6*loyees

6ust "ash han+s afterusing the bathroo6

Auditor visits all

bathrooms to see that

signs are clearl visible

and in good condition

Sa6e Sa6e ?onitoring ?anage6ent goes

through all city healthins*ection re*orts an+

i6*le6ents all

infractions

Auditor e#amines cit

health inspection reports

and in0uires i-

in-ractions have been

corrected

inancial

7e*orting

7estaurant

sales "ill not be recor+e+accurately

>o ensure that all

sales are recor+e+accurately so thatthe financial

re*orting ob5ective

is 6et

Control

8nviron6ent

?anage6ent has

*olicies an+ *roce+uresfor the *ro*er recor+ingof sales by servers an+

cashiers

Auditor e#amines polic

on recording sales andin0uires o- servers and

cashiers

Sa6e Sa6e 7is$

Assess6ent

?anage6ent con+ucts

Huarterly revie"s to

+eter6ine if e6*loyee

turnover has cause+

Auditor re0uests

managements 0uarterl

revie! o- changing

circumstances and

%&



changes to the financial

*roce+ures

in0uires as to resulting

changes

Sa6e Sa6e Control

Activities

?anage6ent reHuires

use of *renu6bere+

server or+er for6s so

that all 6eals can be

accounte+ for

Auditor samples server

order -orms and checks

-or completeness

Sa6e Sa6e Infor6ationan+

Co66unicatio

ns

?anage6ent *re*ares+aily server re*orts to

re*ort on all ti*s for ta=

*ur*osesK all e6*loyees

sign for6

Auditor samples dail

servers2 tip reports to

ensure that all tips are

accuratel reported to

the IS

Same Sa6e ?onitoring ?anage6ent accounts

for all *renu6bere+

server or+er for6tic$ets

Auditor re0uests

management2s report on

monitoring

prenumbered tickets

and in0uires as to action

taken on missing order

-orms

After co6*leting the control 6atri=, the instructor can give the stu+ents an easy

assign6ent. Gave the stu+ents i+entify three ne" control ob5ectivesJ one for o*erations,

one for co6*liance an+ one for financial re*orting. or instance, other threats too*erations 6ight be that the restaurant +oes not get enough custo6ers to stay in business

or that cashiers 6ight steal 6oney. Other threats to co6*liance 6ight be that the

restaurant +oes not *ay fair "ages un+er the air Labor Act or that it fails to *ass Boar+of Gealth ins*ections. A threat to financial re*orting 6ight be that servers allo" frien+s to

eat for free.

>hen the stu+ents can +eter6ine "hat $in+ of evi+ence the internal au+itor "oul+as$ for in or+er to evaluate ho" "ell 6anage6ent’s actions cover the threats. >his easy

assign6ent hel*s stu+ents un+erstan+ the connection bet"een 6anage6ent’s

res*onsibility to have control ob5ectives in *lace to 6eet the restaurant’s ob5ectives an+the au+itor’s role in gathering evi+ence to evaluate 6anage6ent’s control ob5ectives.

Conclusion

In to+ay’s business environ6ent, Sarbanes2O=ley has 6a+e it i6*erative that

everyone in the organiation be concerne+ "ith goo+ internal controls. Both the e=ternalau+itor an+ the internal au+itor are involve+ in the Sarbanes2O=ley *rocess. It is

i6*erative that accounting stu+ents stu+ying au+iting, in a++ition to un+erstan+ing the

res*onsibilities of e=ternal au+itors, also be $eenly a"are of the 6anagerial role thatinternal au+itors *lay in assuring that internal controls are +esigne+ an+ o*erating

effectively. Using a control 6atri= a**roach see A**en+i= A for finishe+ 6atri=F

*rovi+es those stu+ents "ith a valuable learning e=*erience.

%%



Appendi# A

Control (atri# -or a estaurant

C$S$

$b&ectives

o- "ntit

Threats to the

"ntit

Control $b&ective

+To stop the

Threat3

(anagement2s

esponsibilit,

Internal Control

"lement +C$S$,

"vidence that

Control $b&ective is

Being (et

+(anagement2s

esponsibilit,

Audit Procedure

+Auditor2s

esponsibilit,

O*erations 86*loyees

"ill lose

fingers onshar*

eHui*6ent

>o ensure that

e6*loyees +on’t

lose fingers onshar* eHui*6ent

Control

8nviron6ent

?anage6ent

*rovi+es training

sessions for all ne"e6*loyees on ho" to

use eHui*6ent safely

Au+itor reHuests an+

revie"s sche+ule of

*ast an+ future trainingsessions an+ chec$s that

all e6*loyees have

atten+e+

O*erations Sa6e Sa6e 7is$ Assess6ent ?anage6ent revie"s

the eHui*6ent to

6a$e sure that anyne" eHui*6ent isinclu+e+ in training

sessions

Au+itor reHuests

eHui*6ent revie"

re*orts fro66anage6ent. 8=a6inesne" eHui*6ent. Chec$s

against training sessions

O*erations Sa6e Sa6e Control Activities Safety bla+es are

reHuire+ to be $e*t on

all eHui*6ent "hen

eHui*6ent is not isuse

Au+itors sa6*le

eHui*6ent an+ ins*ect

to see that safety bla+es

are on eHui*6ent not inuse

O*erations Sa6e Sa6e Infor6ation an+

Co66unications

7e6in+ers about

eHui*6ent safety are *oste+ near all

eHui*6ent

Au+itor e=a6ines signs

near all eHui*6ent tosee that they are *oste+

an+ in goo+ con+ition

O*erations Sa6e Sa6e ?onitoring ?anage6ent $ee*slogs of safety "al$2

throughs to see that

eHui*6ent is covere+

"hen not in use an+e6*loyees are

follo"ing safety

*roce+ures.

Au+itor reHuests safety"al$ through logs an+

+eter6ines that

co66ents have been

a++resse+

Co6*liance 7estaurant6ay lose its

license +ue to

not a+hering tohealthregulations

>o ensure that allhealth regulations

are follo"e+ so that

restaurant +oes notlose its license

Control8nviron6ent

?anage6ent has *olicies an+

*roce+ures on all

health regulationsK allne" e6*loyees 6ustrea+ an+ sign off.

Au+itor e=a6ines *olicies an+ *roce+ure

6anual to see that

health regulations areinclu+e+ an+ arecurrentK e=a6ines sign

off by all e6*loyees

Co6*liance Sa6e Sa6e 7is$ Assess6ent ?anage6ent revie"schanges to health

co+e on a regular

basis to see if ne"

regulations havea++e+ to their ris$s

Au+itor e=a6ines6anage6ent’s revie"

of ne" health co+es an+

evaluates conclusions

%



Co6*liance Sa6e Sa6e Control Activities ?anage6ent has

*olicy that no foo+

shoul+ be left out ofrefrigerator for 6ore

than one hour

Chec$ for "ritten

*olicyK au+itor observes

$itchen for foo+ leftoutK au+itor inHuires of

e6*loyees to see if they

follo" *olicy

Co6*liance Sa6e Sa6e Infor6ation an+Co66unications Signs are clearly *oste+ stating that

e6*loyees 6ust "ash

han+s after using the bathroo6

Au+itor visits all bathroo6s to see that

signs are clearly visible

an+ in goo+ con+ition

Co6*liance Sa6e Sa6e ?onitoring ?anage6ent goesthrough all city health

ins*ection re*orts

an+ i6*le6ents all

infractions

Au+itor e=a6ines cityhealth ins*ection

re*orts an+ inHuires if

infractions have been

correcte+

inancial

7e*orting

7estaurant

sales "ill not

be recor+e+accurately

>o ensure that all

sales are recor+e+

accurately so thatthe financial

re*orting ob5ective

is 6et

Control

8nviron6ent

?anage6ent has

*olicies an+

*roce+ures for the *ro*er recor+ing of

sales by servers an+

cashiers

Au+itor e=a6ines

*olicy on recor+ing

sales an+ inHuires ofservers an+ cashiers

inancial

7e*orting

Sa6e Sa6e 7is$ Assess6ent ?anage6ent

con+ucts Huarterly

revie"s to +eter6ine

if e6*loyee turnoverhas cause+ changes to

the financial

*roce+ures

Au+itor reHuests

6anage6ents Huarterly

revie" of changing

circu6stances an+inHuires as to resulting

changes

inancial

7e*orting

Sa6e Sa6e Control Activities ?anage6ent reHuires

use of *renu6bere+

server or+er for6s sothat all 6eals can be

accounte+ for

Au+itor sa6*les server

or+er for6s an+ chec$s

for co6*leteness

inancial7e*orting

Sa6e Sa6e Infor6ation an+Co66unications

?anage6ent *re*ares +aily server

re*orts to re*ort on

all ti*s for ta=

*ur*osesK alle6*loyees sign for6

Au+itor sa6*les +ailyservers ti* re*orts to

ensure that all ti*s are

accurately re*orte+ to

the I7S

inancial

7e*orting

Same Sa6e ?onitoring ?anage6ent

accounts for all *renu6bere+ server

or+er for6 tic$ets

Au+itor reHuests

6anage6ent’s re*ort on6onitoring

*renu6bere+ tic$ets

an+ inHuires as to actionta$en on 6issing or+er

for6s

%'



Bibliograph

Cha6bers, An+re" D., @>eaching Internal Au+iting at a University2An 8=a6*le in

Content, >he Accounting 7evie", anuary %<4(F, :ol. LIII, !o.%, PP. %E'2%E4.

Croc$ett, a6es 7., @>he Dyna6ics of Accounting 8+ucation an+ >heir 8ffects on

Internal Au+iting, ?anagerial Au+iting ournal, %<<'F, :ol. (, Iss. E, **. 42'.

Dittenhofer, ?orti6er A., @>eaching Internal Au+itingJ >he Case2Stu+y ?etho+,

?anagerial Au+iting ournal, %<<F :ol. 4, Iss', **. %42E.

ernan+es, ohn ., @Pre*aring >o6orro"’s Internal Au+itor, ?anagerial Au+itingournal, %<<EF, :ol. <, Iss. K Pages &2'.

ernan+es, ohn ., ?argaret L. Po*os$y an+ Lin+a . Savage, @O*erational Au+iting

8+ucationJ Gigh2I6*act >echniHues, ?anagerial Au+iting ournal, %<<1F, :ol. %&, Iss.', ** %<2.

oster, Sheila D. an+ ?ary Bra+y ;reena"alt, @Internal Au+iting 8+ucationJ A

Co6*arison Across Countries, ?anagerial Au+iting ournal, %<<1F, :ol. %&, Iss. ', **.

'%2'0.

;reena"alt, ?ary B., an+ Sheila oster2Stinnett, @8=*eriential Learning for the Internal

Au+iting Stu+ent, ?anagerial Au+iting ournal, %<<F, :ol. 4, Iss. ', **. (2%.

Philli*s, >. ., an+ B. >. Le"is, @Internal Au+it 8+ucationJ >he Accounting Curriculu6’s

;reatest Deficiency, ournal of 8+ucation for Business, aneb %<<%F, :ol. 00, Issue ',

** %402%(&.

Sinason, Davi+ G., @Attracting Stu+ents to Internal Au+iting Careers, Internal Au+iting,

aneb &&E, :ol. %<, Iss. %, **. '<2E.

-ilson, Dennis, @>each the Process, !ot the Content, ?anagerial Au+iting ournal,

%<<1F, :ol. %&, Iss. ', **, %12%(.

%E

air spring07 art2

Documents