1. INTERNAL AUDIT REPORTS
Parity Twinomujuni CIA
Makerere University
Internal Audit Department

2. Session Coverage Challenges with Internal audit reports
Consumers of internal audit reports
Report structure
Guidance for efficient reporting

3. The Standard 2400 – Communicating Results
Internal auditors must communicate the engagement results.
This communication is usually in form of audit reports

4. What are the common challenges with our reports
Scoping is often not formally communicated to Auditees
Reports are too voluminous and complex and in some cases too short
Time taken to publish reports – completion of fieldwork to reporting
Reports that are not supported by evidence

5. Common challenges Drafting / sometimes English – too much jargon
Over emphasis of issues
Personalizing reports
Negative language
Poor flow – non critical issues emphasized and critical issues left out etc

6. Understanding the user needs
Who reads our reports? Mgt, Audit Committee, Other stakeholders,
What are their uses of the report?
What kind of message do they seek?
How can we ensure that our reports are actionable?
How can we incorporate value addition in reporting?

7. Guidance on scoping
2201.C1- Internal auditors must establish an understanding with consulting engagement clients about objectives, scope, respective responsibilities, and other client expectations. For significant engagements, this understanding must be documented.

8. Common Report Structure
Executive Summary
Detailed Report – Audit Observations
Appendices

9. Executive Summary Objectives Scope Opinion or Conclusions
What about the Background

10. Executive Summary: Objectives
What did the audit aim to accomplish?
Why did you perform the audit?

11. Executive Summary: Scope
What did the audit cover and, if necessary, what did it not cover and why? Period and Area

12. Executive Summary: Opinion or Conclusions
What are the causes of the conditions and how severe are the effects?
What is really wrong (or right) and how bad(or good) is it?

13. Internal audit reports Findings
An internal audit report is a collection of findings that an auditor identifies during the engagement process.

14. Components of an Audit finding
The five components of audit reporting are:
Criteria
Conditions
Causes
Effects
Recommendations and/or Action Plans

15. Example
Criteria
Company policy requires that all payments above Ushs 1,000,000 should be approved by the CEO
Condition
In a sample of 100 payments above Ushs 1,000,000 paid during the month of June 2009, 30 were paid without CEO approval.

16. Example Continued Cause
Thresholds for approval of payments were not being monitored and followed on a daily basis.
Effect
Payment procedures are not being adhered to. There is a likelihood that fraudulent payments can be made.

17. Example Continued
Recommendations
All payments that were made without CEO approval should be compiled for CEO ratification. Any payments that the CEO will find irregular should be investigated further by the investigation unit.
All future payments should follow approved payment procedures

18. Action / Management response
We agree with the finding. The Finance Manager shall compile all payments affected and have approvals ratified by December 31, The CFO has agreed not to sanction any future payments without proper approvals.

19. Writing-Quality Guidance
2420 – Quality of Communications
Communications must be accurate, objective, clear, concise, constructive, complete, and timely.

20. Interpretation
Accurate communications are free from errors and distortions and are faithful to the underlying facts.
Objective communications are fair, impartial, and unbiased and are the result of a fair-minded and balanced assessment of all relevant facts and circumstances.
Clear communications are easily understood and logical, avoiding unnecessary technical language and providing all significant and relevant information.
Concise communications are to the point and avoid unnecessary elaboration, superfluous detail, redundancy, and wordiness.

21. Interpretation
Constructive communications are helpful to the engagement client and the organization and lead to improvements where needed.
Complete communications lack nothing that is essential to the target audience and include all significant and relevant information and observations to support recommendations and conclusions.
Timely communications are opportune and expedient, depending on the significance of the issue, allowing management to take appropriate corrective action.

22. Writing-Quality Issues
Coherence
Handling of technical terminology
Readability and conciseness
Sentence clarity

23. Technical Terminology Strategies
Replace unnecessary technical terms
Define necessary technical terms
Manage the number and definitions of acronyms and abbreviations
Include a glossary
Shorten the sentences

24. Readability Factors Text Factors Affecting Readability Sentence length
Word difficulty
Coherence
Placement of the main messages
Layout and graphic design

25. Human Factors Affecting Readability
Reading skill
Content knowledge
Attitude
Environment

26. Readability and Conciseness Strategies
Break up long sentences
Replace difficult, unfamiliar words
Eliminate redundancy
Eliminate wordiness

27. Mapped or table formats Paragraph formats Electronic-delivery formats
Report Formats
Mapped or table formats
Paragraph formats
Electronic-delivery formats

28. Mapped or Table Format Allows easy navigation for the reader
“Builds in "the logic
Eases the writing
Encourages conciseness

29. Paragraph Format Enables more coherence
May better meet expectations in some organizations

30. Electronic-Delivery Formats
Allow easy navigation for the reader
“Build in”the logic
Ease the writing

31. Ratings
Can be applied to the entire engagement and/or to each audit observation
What is rated?
Overall internal-control rating
Risk

32. Overall Internal-Control Rating
Two-point rating
Unsatisfactory
Satisfactory
Three-point rating
Needs improvement
Four-point rating
Needs significant improvement

33. Risk Rating
High
Medium
Low

34. Conclusion We need to write actionable reports
Understand who the consumers of our reports are
Use Report structures that are agreeable and easy to read and navigate
Include graphics into our reports
Work on the tone, address critical areas and make our reports as friendly as possible.

35. End
Parity Twinomujuni CIA