auditing new (2) (1)
TRANSCRIPT
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Operational Auditing is a subset of internal auditing
and assist managers by reviewing & evaluating their
activities and recommending improvements, focusing
on efficiency & effectiveness of operations.
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Internal Auditing as a service function
established within an organization to examine
and evaluate its activities.
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Internal Auditing
Financial Auditing Compliance AuditingFraud Auditing
Operational Audit
INTERNAL AUDITING A MANAGEMENT SERVICES
FUNCTION
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Operational Auditing as
a subset of internal
auditing, reviews an
entitys activities forefficiency and
effectiveness and may
evaluate any type of
activity at any levelwithin the organization.
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Management Auditing
is a subset of
operational auditing that
attempts to measure theeffectiveness with
which an organization
unit is administered &
that concentrates moreon effectiveness than on
efficiency.
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EFFICIENCY
Efficiency may be
viewed as an input
EFFECTIVENESS
Effectiveness is output
oriented.
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MANAGEMENT AUDITING A SUBSET OF
OPERATIONAL AUDITING
Resources Inputs
Efficiency Auditing
Product or Service
output
Management auditOperations
OPERATIONAL AUDITING
Efficiency Effectiveness
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Operational Auditing
typically answer such
questions as these are;
Are specified employee
functioning efficiently?
Are current approach still
effective in achieving the
entitys goals in light of
changing conditions?
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PURCHASING
Proper determination of
the entitys need for
goods & service. Selecting Vendors
Receiving Goods
Emergency Purchase Controlling Vendor
Influence
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TRANSPORTATION
Reviewing Freight Costs
Processing Against
Transportation.
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HUMAN RESOURCES
Adequacy of job
analysis, job description
Benefits
Affirmative Action
Training Programs
Interviews
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FINANCIAL
MANAGEMENT
Flexible Budgeting
Budget Coordination
Performance Reporting
by cost and profit center
Cash ControlWorking Capital
Management
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Board of Directors
ProductionMarketingJ. Sparks
Control and MISJ. Sparks Finance
PresidentR. Vector
Kenneth Johns will perform the Operational Audit of VectorsOrganization.
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Audit Objectives
Evaluation Criteria
Discussion on Audit Period
Discussion on the Product Line to be Audited
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Selection of Month for Auditing
Harmonious Relationship is Necessary
Product Managers Role
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Conduct a preliminary survey of the activity or functionalunit to be audited
Develop the Audit program
Perform the Audit Appraise the Efficiency and Effectiveness of the activity
Evaluate the findings
Develop Conclusions and Recommendations
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Obtain an understanding of program to be
audited.
Obtain info including auditees mission,
organizational structure, policies and
procedure, output.
Brief audit team about the program being
audited.
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It should contain procedures to satisfy audit
objectives.
Produce evidence to support or reject
auditors findings.
It should determine coordination of program
with companys policy.
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Auditors evidence should be sufficient and
relevant to audit objectives.
He should gather physical, documentary,
testimonial and analytical evidence.
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Assess the goals being achieved.
Determine effectiveness of resource
utilization within the unit.
Determine effectiveness of fraud control.
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Determine elements needed for audit
findings: criteria, condition, effect, cause.
Determine auditees suggestion to improve
the program.
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Gain auditees consent on the findings and
improvements.
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The auditor's report
(Audit Report) is a
formal opinion, issued
by either an internalauditor or an
independent external
auditor as a result of an
internal or externalaudit.
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Inform: To makedepartment managementaware of a situation bycommunicating the results
of our audit work. Persuade: To convince
department managementthat our comments arevalid and worthwhile.
Results: To convincedepartment managers totake appropriate action.
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Clear And Concise
Constructive
Style
Personal Pronouns
Presented Convincingly
Cause And Effect
Auditee Effect
Lastly Reviewed
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Most operational audit report contain the
following components.
Letters Of Transmitted
Scope Of The Audit
Findings & Conclusions; and
Recommendations
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Work papers
AuditReport
..................................................
..............................
....................
CommentsPACs 5 C's
Field Report
Final Report
Management
Action Plans
Revisions
Talk-ups
+
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Comment 1
Management Action Plan
Objectives
Risks & Exposures Overall Assessment
Rating
EXECUTIVE SUMMARY
Detailed Comments
Final Report Distribution: Line Management
Compliance Organization
General Auditor
Outside auditors
HR
MAP's
Executive
Summary
Recommendation
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RED
YELLOW
GREEN
Control environment is satisfactory. Continuing local management action and resource allocation is
sufficient.
Processes/policy/procedure/practice sufficient to meet business
objectives
Improvement required.
Important business risk issues that justify management action,
resource allocation.
Processes/policy/procedure/practice in place but effectiveness needs to
be enhanced.
Direct, immediate management action and resources required.
Serious business risks present.
Processes/policy/procedure/practice insufficient to give reasonable
assurance of meeting business objectives.
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Governmental
Compliance Auditing a
form of compliance
attestation, involvestesting & reporting on
compliance with various
federal & state laws and
regulations.
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Compliance auditingdetermines whether aprocess or transaction
has or has notfollowed applicablerules. If rules areviolated, the auditor
determines the causeand recommendsways to prevent futuredeviations.
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It is defined as testing
and reporting on
conformity with laws
and regulations relatingto recipients of federal
financial assistance
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An external auditor is
an audit professional who
performs an audit in
accordance with specific
laws or rules onthe financial statements of
a company, government enti
ty, other legal
entity or organization, andwho is independent of the
entity being audited.
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Responsibility under generally acceptedauditing standards (GAAS)
Responsibility under governmental auditing
standards as set forth in the generalaccounting office's (GAO) yellow book"; and
Responsibility under the federal single auditact of 1984 (and amended in 1996), as definedand interpreted in OMB circular A-133 issuedby the U.S office of management and budget.
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