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The anatomy of an audit part one
The anatomy of an internal audit

The three P’s

Planning, planning, planning! Never forget how important planning is in making sure that an audit runs smoothly. This includes what is being audited; notifying the auditee (person being audited); collecting and analysing the data being audited; identifying key risks and scoping the audit. There are audits that must be performed so, when planning for the year, these audits are factored in. Then every year, when planning assignments, input is received from management, as to the risk areas in the business, and audits based on high-risk areas are planned for that year. The scope of the audit normally covers the previous six to twelve months and must include current transactions indicate what is happening now. Audits by their nature are past orientated but must also be present and future focused.

Commuication is key

It is vital to inform management or the auditee of the upcoming audit and to request reports and samples before commencing the audit. Also, to ensure that the relevant personnel are available to be interviewed. Data analytics and CAATS (Computer Aided Audit Techniques) should be performed prior to fieldwork to highlight exceptions and errors in transactions. It is not the primary purpose of Internal Audit to root out fraud but this must always be on the radar. If a risk is identified during the audit (particular a fraud risk) then the scope can be amended to concentrate on this area. There has to be some flexibility in planning and conducting the audit to allow for “drill down” into these areas.

Think targets

When planning – a task plan needs to be set with all tests to be performed, the person responsible, budgeted hours and the target completion for each task. Tasks and tests can be allocated points to monitor the productivity of the auditors on a daily and weekly basis. It is important to set targets to give something to work towards. Every auditor from intern, clerk and junior upwards is an “executive” and has to act in this capacity and think in a strategic way.

It is important that the entire team is involved in planning. This “grows” juniors and gives them the big picture. All juniors and clerks are executive material and should be treated this way. They should take responsibility for their work and be able to THINK. It is vital that an auditor is able to think and not just “tick and bash”. You have to know the “why” of the controls tested, “what” the risks being mitigated are, “how” the processes work and “who” is responsible.

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