Operational Auditing

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Operational Auditing
Spring 2008 Professor Bill O Brien
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Roles of Internal Auditing

• Auditing or assurance
• System design implementation
• Performance appraisals
• Consultations
• Strategic planning
• Merger acquisition analysis
• Market appraisals
• Investment analysis

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Control Objectives

• Safeguarding of assets
• Compliance
• Organizational goal obj. achievement
• Reliability and integrity of info
• Economical efficient use of assets

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Risk CategoriesEvidence of Risk

• Inadequate information
• Failure to follow policies etc.
• Loss of assets
• Poor use of resources
• Failure to achieve goals objs.

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Organizational Relationship

• Reporting responsibility
• As high as possiblethe Audit Committee
• Administrative responsibility
• To a key interested party

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Audit Committee History

• NYSE Suggests in 1940
• AICPA Recommends in 1967
• FCPA Strong imperative in 1977
• Treadway Recommends requirement in 1987
• Blue Ribbon Committee-1999
• Sarbanes-Oxley Act-2002

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Effective Audit Committees

• Independence
• Skills balance
• Time availability
• Tough-mindedness
• Clear charter
• Specific duties
• Maintain documentation

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Role of Audit Committes

• Financial reporting
• Corporate governance
• Corporate control
• Treadway Comm. Compliance
• Requires direct communication
• Audit plans
• EDP concerns
• Special areas of risk

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Interaction with Auditors

• Evaluate I/A staff
• Review audit philosophy
• Review control systems
• Review plan and financial impact
• Multi-year coverage comparison
• Provide special requests
• Assure free access for I/A
• Support I/A independence
• Oversight for logistics and status

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Ops. Audit as a Profession

• Professional attributes
• Exam
• Standards
• Statement of responsibilities
• Inst. of Internal Auditors
• Professional leadership
• Technical resources and training
• Code of ethics

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Accounting Business Skills The What

• Business perspective
• Organizational focus
• Bias for action
• Communication excellence
• People proficiency

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Financial Management Guidelines The How

• Cc
• KTT
• MBWA
• R R3