Internal Audit

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Internal Audit

• A mostly friendly watchdog

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Internal Audit is not an optional function.

• HEFCE requires that
• each HEI must have an effective Internal Audit
  function, which reports regularly to the audit
  committee and at least annually to the governing
  body and the accountable officer.
• IA should have and be seen to have sufficient
  status, respect and support within the HEI

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• The Head of the Internal Audit function must have
  direct access to the HEIs Accountable Officer,
  the Chair of the Audit Committee and, if
  necessary,the Chair of the Governing Body.
• Internal as well as external auditors must also
  have unrestricted access to information
  including all records, assets, personnel and
  premises and be authorised to obtain whatever
  information and explanations the Head of the
  Internal Audit function or the external auditor
  considers necessary.

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What does a good Internal Audit function do?

• An effective Internal Audit function helps an
  organisation accomplish its objectives by
  bringing a systematic, disciplined approach to
  the evaluation of risk management, internal
  control, value-seeking, compliance and governance
  processes.

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How does it do this in practice?

• Identify stakeholders and needs
• Set or note existing baselines
• Measure, evaluate and report
• Improve processes, measures, targets,
• Go round again..

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The COSO cube of internal control

• The back to basics approach to internal control
  which IA usually seeks to assess and report on.
• Aim to improve the quality of financial
  reporting through a focus on corporate
  governance, ethical practices, and internal
  control. It focuses on the three key objectives
  of
• effective and efficient operations
• reliable financial reporting
• adherence to relevant legislation and regulation

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What to Audit

• The range of audit activity should be determined
  on a risk basis with reference to
• Regulatory requirements
• Opportunities for fraud
• Extent of expenditure
• Results of previous audits
• Time since last audit
• Management request

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Looking at SOAPMAPS

• Segregation of duties
• Organisation
• Authorisation and approval  
• Physical construction
• Management
• Arithmetical and accounting accuracy
• Personnel
• Supervision

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The hallmarks of a good audit

• Sufficiently well scoped to add value
• Sufficiently flexible to adapt to matters that
  emerge
• Not flagged up so far in advance that there is
  time to alter the evidence
• Involving every level of the process under
  scrutiny
• Fair and reasonable it is primarily a search
  for improvement not a witch hunt

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LSE Audits

• LSE is London Met but issues still arise on data
  quality - HESA return, TRAC returns, OFFA, IA is
  required to report on processes to complete these
  returns
• Regulations and processes that are not followed
  weaken the School, (expenses, due diligence, cash
  handling etc)
• The tabloid test (aka front page headlines how
  bad could it be?)
• Fraud, theft, carelessness, honest mistake.
• Seeking value for money economy efficiency and
  effectiveness they spend how much?

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Whats in it for you?

• Economy how to save money.
• Leveraging LSE buying power
• Do we really need it?
• Can we share?
• Can we prevent leakage?

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Efficiency not wasting effort.

• Is there a quicker way?
• Can we avoid re-work?
• Is someone else doing the same thing?
• Can we get added value from our asset/resource?

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Effectiveness doing what it says on the tin.

• Is the system properly designed to deliver the
  required outcome?
• Is the system properly implemented to deliver the
  required outcome?
• Are there perverse results?

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What next?

• The audit process is evolving - when it is your
  turn you will see there are deadlines and
  responsibilities clearly set out.
• Youve had an audit what next?
• Audit Committee will you be a witness?.
• Management what action will you take?
• Recommendation follow up we will be back!
• ?