1. Operational Auditing--Spring 2000 (3/2) 1 Audit Priority Factors 4 Last audit 4 $ exposure 4 Risk 4 Management requests 4 Operational changes 4 Opportunity for results 4 Changes in staffing

2. Operational Auditing--Spring 2000 (3/2) 2 Method of Selection 4 Set selection strategy 4 Identify potential auditees 4 Rank by risk 4 Choose entities

3. Operational Auditing--Spring 2000 (3/2) 3 Alt. Selection Strategies 4 Location 4 Financial exposure 4 Operational complexity 4 Staffing 4 Mgt. Interest 4 Functional type 4 Process type 4 Decision center

4. Operational Auditing--Spring 2000 (3/2) 4 Risk Factors 4 Quality of control system 4 Mgt. Competence 4 Mgt. Integrity 4 Size & liquidity of assets 4 System changes 4 Complexity 4 Personnel changes 4 Economic performance 4 Growth rate 4 Systems use

5. Operational Auditing--Spring 2000 (3/2) 5 Risk Factors, cont. 4 Time since last audit 4 Performance pressure 4 Government regulation 4 Employee morale 4 Politics & publicity 4 Geographic location 4 External audit plans

6. Operational Auditing--Spring 2000 (3/2) 6 Risk Analysis Methodology 4 Select top 5 risk factors 4 ID risk on scale of 1 to 5 4 Total the risk score 4 Rank in order of risk

7. Operational Auditing--Spring 2000 (3/2) 7 Project Prioritization & Selection 4 Rank by risk 4 Rank by hours 4 Compare to resources 4 Re-prioritize as necessary

8. Operational Auditing--Spring 2000 (3/2) 8 Audit Preparation 4 Establish obj. & scope 4 KTT--Gather background info 4 Select resources 4 Contact auditee 4 Prepare preliminary program 4 Report planning 4 I/A approval

9. Operational Auditing--Spring 2000 (3/2) 9 Nature of Objectives 4 Review 4 Compliance 4 Evaluation 4 Combination of the above

10. Operational Auditing--Spring 2000 (3/2) 10 Scope 4 What (interest) & How (activity) 4 Scope is based on: –Adequacy of controls –Effectiveness of controls –Quality of performance

11. Operational Auditing--Spring 2000 (3/2) 11 Linkage of Obj. & Exam 4 See page 287 in text.

12. Operational Auditing--Spring 2000 (3/2) 12 Program Preparation 4 Audit preparation 4 Initial survey 4 Systems review 4 Detailed operations review (TBD) 4 Reporting issues 4 Wrap-up procedures 4 Exhibit 7-2 on p. 297

13. Operational Auditing--Spring 2000 (3/2) 13 Selecting an Auditee “The 6 R’s” 4 Risk 4 Resources 4 Reward 4 Requests 4 Requirements 4 Revisions in operations or mgt.