LEBANESE AMERICAN UNIVERSITY INTERNAL AUDIT TERMS OF REFERENCE

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LEBANESE AMERICAN UNIVERSITYINTERNAL
AUDITTERMS OF REFERENCE

• Approved by Board of Trustees and Overseers
• March 2000

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INTRODUCTION

• This section defines the role of
  the Internal Audit
• Department required to provide an independent
  appraisal of the Universitys financial,
  operational, and control activities.
• Types of Audits
• Work performed by the Internal Audit
  Department can be divided into four categories
• A- General Audit
• B- Special Requests
• C- Special Investigations
• D- Consulting Services

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A- General Audit

• Under this category, it is the responsibility
  of the Internal Audit Department to test,
  evaluate, and analyze the system of internal
  control employed by management, to safeguard
  University assets and to ensure the accuracy of
  financial records. Moreover, the Internal Audit
  Department shall also review processes for
  compliance with all the University policies and
  procedures, and promote operational efficiency
  when appropriate.
• The Internal Audit Department shall provide,
  in co-operation with the Vice President for
  Finance and Administration, the President and the
  Audit Committee the annual general audit plan
  for review and approval.

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Audit activities shall include, and are not
limited to, the following

• Determine the accuracy and validity of financial
  transactions
• Evaluate the financial and operational procedures
  for adequacy and effectiveness of internal
  controls
• Verify the existence of University assets and
  ensure that assets are adequately safeguarded
  against loss
• Assess the level of compliance with the
  University policies and procedures
• Assess compliance with the laws and regulations
• Evaluate the Universitys electronic information
  and processing systems and review major
  modifications to ensure the inclusion of
  necessary controls

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• Review specific processing systems such as fees
  collection, payroll, purchases, etc.
• Review investment operations of the University
  and assess compliance with its guidelines
• Identify operational opportunities for cost
  savings
• Co-operate with the External Auditors to
  facilitate their tasks
• Assess the Universitys compliance with
  conditions and restrictions in cases such as
  sponsored grants, contract requirements, and
  donor restrictions on use of funds
• Evaluate the adequacy and reliability of
  information available for management decisions
• Identify inefficient practices and procedures and
  formulate recommendations to management for
  improvements

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• Review and assess whether the University policies
  and procedures are being respected and complied
  with. Such review will cover financial and
  non-financial policies and procedures, such as
  admission, registrar, financial aid, recruiting,
  etc. Assess the implication of these policies and
  procedures on all faculty members and students
• Review and assess whether existing policies,
  procedures, and practices are useful, effective,
  and economically justified
• Assess whether conflict of interest exists
• Review specific department/school operations
  e.g. staff utilization, meet objectives and
  targets, management practices, etc.
• Review and assess the adequacy of channels of
  communication to provide reliable information
  internally and externally, e.g. stakeholders,
  donors, alumni, etc.

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• Examine that various educational support are
  being obtained on a regular basis and are
  available to assist the student e.g..
  availability of computers, books, projectors,
  course materials, etc.

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B- Special Requests

• The Internal Audit must allocate a certain
  amount of time as needed to conduct special
  requests. The President and/or Audit Committee
  initiates these requests which may vary in nature
  and can be related to the policies and
  procedures, processes and controls, professional
  advice, fraud, loss of assets, violation of
  contractual activities, etc.

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C- Special Investigations

• Very critical in nature and require the
  immediate attention of the Internal Auditor. The
  Internal Audit shall assist management in
  evaluating the loss impact and control
  weaknesses. They shall recommend corrective
  measures to prevent subsequent recurrences.

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D- Consulting Services

• This category outlines areas of
  responsibilities whereby the Internal Audit shall
  act as an in-house consultant to various
  faculties and departments. It is the
  responsibility of the upper management and Audit
  Committee to outline areas where consulting
  services are required.

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• The Internal Audits consulting service could
  be valuable to every department and school and
  in general, the Internal Audit can perform many
  consulting activities, including, but not limited
  to, the following
• Provide input, whenever necessary, for
  implementation of information systems evaluate
  computer system controls, etc.
• Assist in the investigation of abuse/harassment
  complaint as requested by Administration

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• Assist in setting financial aid evaluation
  criteria, ensure the absence of discrimination
  and good management of the work aid program
• Assist management in developing and verifying
  implementation of a grading system allowing
  management to monitor the standard of education
  at the University
• Review faculty and staff recruiting policy and
  procedures and their implication on the quality
  of service

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REPORTING

• Twice a year, the Head of Internal Audit shall
  submit to the Board a written report on the
  Internal Audits activities and findings.
• Such report will include
• Audit record highlight the facts of the audit
  findings
• Effect describe the impact of the audit findings
  
• Recommendations for corrective actions
  co-developed and agreed action with management to
  correct/improve operations
• Timing outline key dates for completion

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• The preliminary findings shall be discussed,
  with the Auditee of the department concerned and
  communicated to the Vice President concerned and
  the Vice President for Finance and
  Administration.
• Once findings have been discussed, a formal
  report will be distributed to the Auditee of the
  activity, President, Vice President for Finance
  and Administration and Vice President concerned
  and the members of the Audit Committee and
  subsequently to the Board.

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FOLLOW- UP REVIEWS

• Follow-up reviews are performed on prior
  recommendations to provide assurance that
  management has adequately implemented
  recommendations and resolved previous problems.
  These reviews also ensure that the upper
  management is informed of non-resolution of
  previous problems.

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ORGANIZATIONAL STATUS

• The Head of Internal Audit Department shall
  coordinate with the Vice President for Finance
  and Administration (through a dotted line
  structure) and report to the President with
  unrestricted right of access to the Audit
  Committee of the Board.
• In order to ensure the independence of the
  Internal Audit function, the appointment,
  remuneration, and termination of the Head of
  Internal Audit should be subject to the formal
  approval of the Board Audit Committee.

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AUTHORIZATION AND RESPONSIBILITIES

• Internal Audit Department has the authority,
  as part of the on-going audit plan approved by
  the President and the Audit Committee, to audit
  all parts of the University and shall have full
  and complete access to all the records,
  personnel, property and operations of the
  University with due responsibility for
  safekeeping and confidentiality. Internal Audit
  Department will not have a direct responsibility
  for any of the activities reviewed. They should
  not develop or install procedures, prepare
  records, or engage in activities that would
  normally be reviewed by them.

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STANDARDS AND ETHICS

• Internal Audit Department will adhere to the
  Standards for the Professional Practice of
  Internal Auditing and the Code of Ethics adopted
  by the Institute of Internal Auditors (IIA).

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PROFESSIONAL DEVELOPMENT

• The Head of Internal Audit Department will be
  responsible for continuing educational
  development to enhance professional and personal
  growth. He will ensure that all Internal Audit
  staff has received the appropriate training to
  perform their jobs efficiently. A yearly training
  program shall be developed and approved by the
  Audit Committee and management.

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Head of Internal Audit Principal Duties and
Responsibilities

• The Head of Internal Audit Department
  principal duties and responsibilities include
• Assess the University business risks. Such
  assessment to be conducted once every three years
• Develop a medium term plan based on assessed
  business risks
• Develop the annual audit approach based on the
  medium term plan
• Manage the execution of the audit plan, establish
  overall audit criteria, develop audit schedules,
  assign personnel based on scope and complexity
  and establish extent of examination and audit
  techniques to be applied

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• Review audit working papers and direct staff in
  analyzing and summarizing observations
• Evaluate audit findings, formulate and present
  formal recommendations to management and Audit
  Committee
• Provide regular progress reports to senior
  management and the Audit Committee
• Respond to special project needs designated by
  executive management and/or Audit Committee
• Ensure Internal Audit remains effective,
  credible, productive and focused on areas of most
  significance
• Work with line management constructively to
  challenge and improve established and proposed
  practices and to put forward ideas for improving
  processes

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• Foster a culture of co-developing agreed
  solutions with management
• Develop an appropriately skilled team (select,
  train and evaluate), supported where necessary by
  external expertise to meet best practice
• Maintain an open relationship with the External
  Auditors
• Perform other related duties
• Oversee the office administrative operations

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THE END
Presentation Prepared by Internal Audit September
2000