Internal Audit Process

Internal Audit Process • Auditee selection • Audit planning • Preliminary survey • Internal control review • Expanded testing • Develop findings & recommendations • Reporting • Follow-up • Post audit evaluation Operational Auditing--Fall 2005

Control Self Assessment (CSA) • Methodology • Review and Identification • Key business objectives • Related risks • Mitigating controls Operational Auditing--Fall 2005

CSA-History • Introduced by Gulf Canada in 1987 • Gulf used facilitated meetings Operational Auditing--Fall 2005

Facilitated Meetings • Management and staff participate through interviews and polling • Objectives • Risks • Processes • Soft and/or informal controls Operational Auditing--Fall 2005

General Methodology • Shared process • Assessment of internal controls • Evaluation of risks • Development of action plans • Assess the likelihood of achieving objectives • SJSU simulation Operational Auditing--Fall 2005

General Approaches • Facilitated meetings--group workshops • Questionnaires--yes/no answers • Management analysis--self studies Operational Auditing--Fall 2005

Uses • Self analysis for risk* • Selection of audit areas* • Internal control review* • Special projects • Soft control analysis * alternatives to the traditional approach to the I/A process Operational Auditing--Fall 2005

Benefits • Increases I/A scope • Target review of high risk areas • Increases the effectiveness of corrective action • Builds team-oriented relationships Operational Auditing--Fall 2005

What Is Storyboard Flowcharting? • New method for documenting a process. • Clean and simple flowcharting method. • Allows for clients and auditors to clearly understand process under review. • Simple technique that requires a good graphics package and a little imagination. • Can use Microsoft PowerPoint, Harvard Graphics, Corel Draw, etc. • Does not replace IS flowcharting. Operational Auditing--Fall 2005

The Basics of Storyboard Meet with client and document process. Use your imagination to choose/draw picture. Under picture write narrative for each step represented. Be creative - good control narrative in green; poor controls in red. Completed storyboard must be reviewed with client. Make any changes necessary. Final copy should be in color for most effective presentation. Different process may require different approach.

A • Print out story board - • black and white draft and • color for final. • Review storyboard • with client and obtain • sign off. How to Storyboard A • Meet with client and document process. • From client interview • create storyboard. Operational Auditing--Fall 2005

Start Company XYZ Order-fulfillment process Customer Service Rep Receives Order Customer Service Rep Researches And Corrects Information NO Approved By Manager? By Phone? Customer Service Rep. Key Enters Data on-Line Print Three-Part Shipper YES YES NO Yellow and Green To Shipping Department On Standard Order Form? By Mail or Fax? Pink to Accounts Receivable Department Scan Form Into System YES YES NO Shipping Pulls And Packs Orders Send to Special Order Department ShippingFiles Yellow Shipping Sends Order and Green Copy (Invoice) End Operational Auditing--Fall 2005

Company XYZ Order-fulfillment process A Receives orders by fax or mail. Standard orders are scanned into system. Customer Representative A three-part packing slip is printed per order. Receives orders by phone. Customer Representative enters order data on-line. Pink copy sent to accounts receivable department. A Green copy sent with order. Packing slip approved by Manager. If not approved, returned to Customer Representative for correction Packing slip Yellow and green copy go to shipping department. Shipping pulls and packs orders. Yellow copy filed in shipping department. Operational Auditing--Fall 2005

Work Paper Purposes • Documentation of evidence • Audit execution and planning tool • Follow-up reference • Review facilitator Operational Auditing--Fall 2005

Other W/P Factors • Ownership: the company • Preparation guidelines • Completeness & accuracy • Clarity & understandability • Legibility & neatness • Relevance • Attention to detail Operational Auditing--Fall 2005

Sample Work Paper Ref. Heading Purpose: Conclusions T/M Legend: Review Source Operational Auditing--Fall 2005

Flowcharting Begin or End File Activity Decide Document Operational Auditing--Fall 2005

Internal Audit Process