risk based internal audit course · c o n t e n t s 1. 4-phases in the internal audit process 2....
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INTERNAL AUDIT PROCESS
Steps in conducting Internal Audit of an entity
MODULE - 4
RISK BASED INTERNAL AUDIT COURSE
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C O N T E N T S
1. 4-phases in the internal audit process
2. Planning the internal audit
3. Field work
4. Auditing techniques for evidence gathering
5. Reporting
6. Action taken report
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INTERNAL AUDIT PROCESS
4-phases of the internal audit process
Planning
Field work
Reporting
Implementation
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Planning
Field work
Reporting
Implementation
PLANNING THE INTERNAL AUDIT Internal audit process
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Phase-1
The objective is to identify the significant areas/ risks/controls that need to be reviewed and to schedule it in the Audit calendar.
Phase -1: Planning the Internal Audit
Audit universe should cover the risk universe
The significant risks are identified by looking at general & analytical documents
Once the significant areas are identified a list is prepared, project wise to be audited ie. Terms of Reference for audit
The timing of the visit & duration is in the Audit calender
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Phase -1: Annual Plan Part of the permanent audit file
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Step #
Process Activity Output
1 Audit Universe Defining all the entities & business units of the company which form part of the scope of Audit & putting them into categories
Stratified Audit Universe
2 Risk Assessment Identifying significant risks for each area in these entities/business units/departments
Risk register for Auditing
3 Terms of reference
For each business units/area framing the audit objectives for the year
Audit objectives
4 Scheduling Periodicity & timing of field visit during the year.
Audit calendar
Audit Universe
Risk
Assessment
Audit Objective
Audit calendar
FIELD WORK Internal audit process
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Phase-2
The objective is to carry out the field work in a manner that the Audit objectives are met.
Phase -2: Field work generating working paper audit file
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Step #
Process Activity Output
1 Survey of Internal Controls
Against the identified significant risks a survey is done on whether there is an appropriate control . In other words is the control well designed and on the face of it appears to be operational.
Survey results
2 Preparing the audit program
Based on the above survey an audit program is finalised. This includes detailed checklists
Check list & Working paper file (CL&WP)
3 Substantive testing
The steps are - transactions to be included in the sample - obtaining competent evidential matter - drawing conclusions.
Query sheet
4 Report writing
Based on the replies received by management on the queries, an opinion is drawn up by the auditor.
Draft Audit Report
Survey of controls
Finalising
Audit Program
Substantive testing
Report writing
Phase -2: Field work generating working paper audit file
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Step #
Process Activity Output
1 Survey of Internal Controls
Against the identified significant risks a survey is done on whether there is an appropriate control . In other words is the control well designed and on the face of it appears to be operational.
Survey results
2 Preparing the audit program
Based on the above survey an audit program is finalised. This includes detailed checklists
Check list & Working paper file (CL&WP)
3 Substantive testing
The steps are - transactions to be included in the sample - obtaining competent evidential matter - drawing conclusions.
Query sheet
4 Report writing
Based on the replies received by management on the queries, an opinion is drawn up by the auditor.
Draft Audit Report
Survey of controls
Finalising
Audit Program
Substantive testing
Report writing
REPORTING Internal audit process
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Phase-3
The objective is to form & convey an opinion on the reliability of internal controls
Phase-3: Reporting forming & reporting an opinion
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Step #
Process Activity Output
1 Field audit closure
The draft report is discussed with the Project Manager and all the departmental heads. Usually this is well attended and a lively discussion on the issues take place
Audit conclusions
2 Draft report This is the stage wherein a formal reply is asked for. Draft report
3 Final report Based on the replies a final report is issued to the project and copies marked to Senior Management. ( PM, Project Director).Report extracts: are marked to the different HO departments which have an oversight in that area
Final report
4 Report summary
Based on the replies received by management on the queries, an opinion is drawn up by the auditor.
Draft Audit Report
Field audit closure
Draft report
Final report
Report summary
IMPLEMENTATION Internal audit process
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Phase-4
The objective is to remove the deficiencies observed in the system
Phase-4: Implementation forming & reporting an opinion
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• Implementation of observations accepted by the project management need to be reviewed before the next quarter’s Audit committee meeting so that this status can be reported in that meeting.
Action taken report
