AUDIT OF INTERNAL CONTROL Day V Sessions I & II. Session Overview Periodical audit of existence of internal control in order to examine its effectiveness.

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Presentation transcript:

AUDIT OF INTERNAL CONTROL Day V Sessions I & II

Session Overview Periodical audit of existence of internal control in order to examine its effectiveness is necessary. Management may provide internal audit but external auditor must look at existence of internal control Existence of internal control reduces the risk of internal auditor.

Learning objective After this session participants will understand how to see the existence of internal control. Participants will also understand how to conduct the audit of various components of internal control.

Audit of control environment By looking and consulting organisational chart see that organisation has vertical and lateral channels of communication. Auditor should examine the documentation regarding delegation of authority and plans of succession. Auditor also should see the span of control.

Audit of control environment. Auditor should examine the number of vacancies in organisation’s management and how many persons are in acting capacity It should also be seen that whether any arrangements for ensuring continuity of operations in case of temporary absence of top management.

Continued from last slide. To examine integrity and ethical values demonstrated by management see that it is free from any pressure Adherence to the conduct rules may be seen Previous reports may be examined to see above Auditor may also see the kind of values reflected in the behaviour.

Continued from last slide Management’s commitment to competence as well as its philosophy and operating style may examine with the help of managements approach towards human resource issues, way of decision making, way of problem solving and their active application. For this purpose auditor may examine human resource policies.

Continued.. Following issues are also to be examined.. Turnover in organisation Succession planning Procedsure of decision making Use of inputs received from subordinate Process of problem solving (Whether it is participative or directive or mixture of both)

Audit of Risk Assessment See the information supplied by branch offices of the organisation is reliable. Also see whether the coordinating units evaluate data supplied Examine the procedure for data verification. See whether procedures been adhered to Also see whether procedures adopted for remedy if the data tuened to be inaccurate.

Audit of risk continued.. See the factors which has impact on the program. Examine the funding and see if the funds have been cut and what has been the impact on internal control. See the risk factor in respect of funding. See the controls instituted to ensure the appropriate use of funds.

Audit of information See that information available regarding management decision making is relevant, reliable and timely. Is it reliable for external reporting purposes. Examine the data use for decisions Examine whether crosschecks of data was carried out. See the documentary evidence for use of correct data and to see how it is used.

Audit of communication. See that effective and reliable internal communication beteeb management and stakeholder is available. See that staff is available for carrying out internal control. See whether organisation allow for easy flow of information back or forth.

Continued… See what is a process for notifying the management of the problems.Examine the procedure. Examine documents to see if stated procedure adhered to. Examine documentary evidence to see if the problem reported are considered and acted upon.

Auditing internal control activities. Examine design and implementation of policies and procedures for managing the programme. See whether indices have been established to monitor performance of organisation. See that performance measures were reviewed. See the performance measures related to mission goals and objective.

Continued.. See that performance data are continually monitored and analyzed. Examine whether policies to safeguard assets are known to all Examine whether the organisation has identified and ensured adequate protection for its critical issue.

Continued.. Are assets like cash, assets of vulnerable losses theft are adequately guarded. See that stock verification procedures adequate and are they adhered to. See that police to safeguard programme resources and funds exists. Has the organisation has adequate protection to funds.,

Continued.. See whether organisation established criteria foe identifying the grantees for aid, See the criteria. See whether risk assessments performed and documented when system are changed. See whether data sensitivity and integrity considered in risk assessments

Continued.. See whether wide security programme is exists. See whether access to information software code suitable restricted. See whether contingency plan for ensuring continuity of service exists. See whether transactions are properly and promptly classified. Supporting records properly maintained.