Accounting Business Skills “The What”

1. Accounting Business Skills “The What” • Business perspective • Organizational focus • Bias for action • Communication excellence • People proficiency Operational Auditing--Spring 2002

2. Financial Management Guidelines “The How” • Cc • KTT • MBWA • R ƒ R3 Operational Auditing--Spring 2002

3. Human Relations Issues • General people techniques • Due professional care • Hostile management approaches • Dealing with external auditors • Participative approach w/auditees Operational Auditing--Spring 2002

4. General People Techniques • Promote the “wanna” • Foster feedback • Adopt a consultative approach • Use the “Will Rogers’ Approach” Operational Auditing--Spring 2002

5. …Due Professional Care • Be fair but don’t whitewash • Avoid surprises • Go for the win-win • Have the guts to go to the top Operational Auditing--Spring 2002

6. Hostile Management Approaches • Select the right time for discussion • Remain flexible in your conclusions • Avoid emotion; sometimes even logic won’t work • Don’t corner yourself or the other party • Listen to the other party • Help the other guy “to be right” Operational Auditing--Spring 2002

7. Dealing with the External Auditors • Different objectives • Different accountability • Different qualifications • Different activities Operational Auditing--Spring 2002

8. Cooperation • Economy • Efficiency • Effectiveness • Advantages for the external auditor • Increases external auditor client insight • Improves client relations • Rotates emphasis • Advantages for the internal auditor • Improves training • Source of additional work • Increases professional knowledge • Independent appraisal source • Compliance with SAS 65 Operational Auditing--Spring 2002

9. SAS 65 • Defines roles • Defines function • Discusses competency & objectivity • Considers nature of the work • Discusses coordination • Guidelines for evaluation • Role of direct assistance Operational Auditing--Spring 2002

10. Typical Int. Audit Assistance • Design of control systems • Reduction of risk assessment • Reduction of substantive testing Operational Auditing--Spring 2002

11. Create a Cooperative Bridge • Coordination • Risk assessment alert • Control system disclosure • Common sampling tools • Pooled IT knowledge • Different perspective • Constant general communication Operational Auditing--Spring 2002

12. Participative Approach • Joint goals • Consultation • Joint authority • Open discussion re: findings • Open review of reports Operational Auditing--Spring 2002

13. COSO Control Objectives • Economy & efficiency of operations • Reliable financial and operational data and reports • Compliance with laws and regulations Operational Auditing--Spring 2002

14. Control Objectives • Reliability and integrity of info • Compliance • Safeguarding of assets • Economical & efficient use of assets • Accomplishment of goals & objs. Operational Auditing--Spring 2002

15. Types of Control • Preventive • Detective • Corrective • Directive • Compensating Operational Auditing--Spring 2002

16. Methods of Control • Organizational • Operational • Personnel • Review • Facilities Operational Auditing--Spring 2002

17. Threats to Control • Management override • Open access to assets • Form over substance approach • Conflict of interest Operational Auditing--Spring 2002

18. COSO Approach to Achievement • Sound control environment • Sound risk assessment process • Sound operational control activities • Are the processes working • Sound info & communications system • Effective monitoring Operational Auditing--Spring 2002

19. Control Environment • Culture of integrity, ethics and competence • Overall mgt. philosophy • Proper authority & responsibility • Proper organization of resources • Proper training and development • Senior mgt. attention & direction Operational Auditing--Spring 2002

20. Flowcharting Begin or End File Activity Decide Document Operational Auditing--Spring 2002

21. 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--Spring 2002

22. 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.

23. 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--Spring 2002

24. 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--Spring 2002

25. 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--Spring 2002