| 09. Role of auditors | | | | •Bank deposits |
| The auditor's opinion on the truth, fairness, accuracy | | | | •Bank reconciliation |
| etc. of the financial statement imposes a larger | | | | •Accounts payable |
| responsibility on the auditor, which transcends the | | | | •Accounts receivable |
| relationship with the client. The external auditor has | | | | •Disbursements |
| to maintain total independence from the client. The | | | | •Petty cash transactions |
| auditor is supposed to be a watchdog. Government, | | | | •Loans & Advances |
| creditors, investors and the business and financial | | | | •Assets |
| community rely on the independence, objectivity and | | | | |
| integrity of the auditors for maintaining confidence in | | | | |
| operations of a company. | | | | II. Operational Audits |
| | | | | |
| Too continually review and update control for | | | | This type of audit involves a thorough review of a |
| adequacy and ensure controls established are strictly | | | | department's operating procedures and internal |
| adhered to and in line with the guiding objectives of | | | | controls. They deal with broad performance issues, |
| the Centre. Directly Ensure Compliance in all | | | | focusing on whether funds and resources have been |
| departments | | | | economically, efficiently and effectively managed to |
| | | | | fulfill the mission and objectives. An operational audit |
| • Monthly checks the Cashier record and the | | | | includes elements of a compliance audit, a financial |
| Supervisor's posting into the cash book and Pastel. | | | | audit, and an information systems audit. In particular, |
| • Verifies and checks all supporting documents for | | | | management audits examine and report on matters |
| purpose, beneficiary, value authorization and date | | | | related to any or all of the following: |
| • Check and ensure that relevant processes are | | | | |
| followed for stock requisition | | | | •The adequacy of management systems, controls |
| • Ensure internal control measures are operating | | | | and practices, including those intended to control and |
| as laid down | | | | safeguard assets, to ensure due regard to economy, |
| • Ensure overview function of internal audit is | | | | efficiency and effectiveness; |
| spread all over the operation of the Centre | | | | •The extent to which resources have been |
| • Carry out Spot check on all movable assets | | | | managed with due regard to economy and efficiency; |
| including cash | | | | and, |
| 10. Responsibilities of auditors | | | | •The extent to which programs, operations or |
| • Internal Auditor: | | | | activities of an entity have been effective. |
| | | | | |
| Internal Audit is a service to management. Its | | | | III. Departmental Audits: |
| functions include examining and evaluating internal | | | | |
| control and providing assurance to the management. | | | | Departmental audits are designed to review and |
| It is a part of the organization's system of internal | | | | evaluate the activities and operations of a particular |
| control and its scope includes ALL aspects of internal | | | | College function, activity, department, or unit under |
| control, not just financial control. The scope of | | | | review. Departmental audits will evaluate accounting |
| internal audit is much wider than statutory/external | | | | controls, ensure compliance with College policies and |
| audit as discussed in detail above. It should ideally | | | | procedures, applicable laws and regulations, and |
| cover all the organization's activities. | | | | validate the records and account balances of the |
| | | | | auditor. Departmental audits will utilize a complete |
| In short approach: | | | | battery of audit tests and procedures, including, but |
| | | | | not limited to, functional tests, transaction reviews, |
| • Develop, document, implement, test, and | | | | substantive tests, and analytical reviews. |
| maintain a comprehensive internal audit plan and | | | | IV. Operational Audits: |
| system of internal controls to help provide assurance | | | | |
| that applicable laws, regulations, and College policies | | | | Operational audits are designed to evaluate |
| and procedures are complied with judiciously | | | | procedures and controls which impact the attainment |
| • Examine financial transactions for accuracy and | | | | of the College's organizational goals and objectives. |
| compliance with institutional policies and applicable laws | | | | Operational audits also measure compliance with |
| and regulations | | | | College policies and procedures as well as applicable |
| • Evaluate financial and operational procedures to | | | | laws and regulations. During operational audits, |
| assure adequate internal controls are present; | | | | functional tests and transaction reviews will be |
| • Identify, assess, and evaluate the College's risk | | | | utilized. |
| areas; make appropriate recommendations for | | | | V. Grant and Contract Audits: |
| improved internal controls and accounting procedures; | | | | |
| and research and adopt industry best practices | | | | Grant and contract audits are designed to evaluate |
| where appropriate | | | | the contracting process, compliance with the |
| • Work with the senior leadership of the College | | | | provisions of grants and contracts, and third-party |
| to identify key business risks, assess those risks, and | | | | contractual performance. These audits may be |
| establish risk management procedures and practices | | | | performed with respect to any function, activity, |
| based on industry best practices | | | | department, or unit of the College and shall include all |
| | | | | types of contracts; e.g., federal and private grants |
| • External Auditor | | | | and contracts, construction contracts, and |
| | | | | professional service contracts. |
| External auditors have to express an opinion on | | | | VI. Fraud and Financial Irregularity Audits: |
| accuracy and fairness of financial information. An | | | | |
| external audit program encompasses a full-scope | | | | Fraud and financial irregularity audits are designed to |
| financial statement audit, an attestation of internal | | | | verify the existence and magnitude of suspected |
| controls over financial reporting, or other agreed-upon | | | | fraud and financial irregularities. Fraud and financial |
| external audit procedures. | | | | irregularity audits may be conducted at the request |
| | | | | of the Finance Committee of the Board of Trustees, |
| | | | | the President, other senior members of College |
| A typical report includes inter IIA, information on | | | | management; as a result of a tip from the College's |
| | | | | whistleblower hotline; or at the discretion of the |
| | | | | Internal Auditor. The Internal Auditor shall utilize the |
| • Whether they have obtained all the necessary | | | | highest level of discretion when undertaking a fraud |
| information | | | | or financial irregularity audit. The Internal Auditor shall |
| • Whether the companies has kept all the | | | | promptly notify the Finance Committee of the Board |
| requisite books of accounts | | | | of Trustees (including the Chair of the Finance |
| • Whether the financial statements are in | | | | Committee), the President, and any other member of |
| conformity with books of accounts | | | | senior management which may be appropriate, of |
| • The financial statements present a true and fair | | | | any significant findings which result from a fraud or |
| view of the state of affairs | | | | financial irregularity audit. |
| • Proper records for assets, inventory, loans etc. | | | | |
| have been maintained by the company | | | | VII. Follow-up Audits: |
| • Adequacy of internal control procedures | | | | Follow-up audits are designed to determine whether |
| • Existence of internal audit system | | | | corrective action has been taken on previous audit |
| commensurate with nature and size of business. | | | | recommendations. These audits are usually conducted |
| • Details of statutory dues and matters under | | | | six months after the Final Audit Report was issued |
| litigation | | | | and usually include only the deficiencies reported in |
| | | | | the Final Audit Report. The follow-up audit shall include |
| Although internal and external auditors have different | | | | such functional or substantive tests that are |
| and clearly defined roles they do share the same | | | | necessary to verify that necessary and appropriate |
| broad purpose of serving the public by helping to | | | | corrective actions have been taken |
| ensure the highest standards of regularity and | | | | |
| propriety for the use resources and in promoting | | | | 12. The Phased Audit Approach |
| efficient, effective and economic administration. | | | | |
| | | | | A phased audit approach is generally used to |
| | | | | conduct, watch, and whole internal audits in a timely |
| 11. Types of Audits | | | | and skilled manner. This approach may not be |
| | | | | followed for certain special projects requested by the |
| In preparing the Annual Internal Audit Plan, the | | | | Finance Committee of the Board of Trustees and/or |
| Internal Auditor shall determine the type of audit to | | | | senior management, during fraud or financial |
| be performed for each auditor. The following is a | | | | irregularity audits, and under other special |
| summary of the various types of audits which will | | | | circumstances. |
| generally be conducted: | | | | |
| | | | | This phased audit approach allows the Internal |
| I. Financial audit: | | | | Auditor to: |
| | | | | |
| Financial audits are designed to validate the accuracy | | | | • Establish guidelines for completing internal audits; |
| and completeness of records and account balances. | | | | • Identify the entire internal audit process, rather |
| Financial audits will utilize substantive tests, analytical | | | | than emphasizing the fieldwork |
| reviews, and other validation procedures which may | | | | Component as the extent of the internal audit |
| or may not include functional tests or transaction | | | | process; |
| reviews. | | | | •Establish responsibilities and outputs for each |
| | | | | phase of the internal audit process; and |
| In financial audits, significance or materiality is usually | | | | • Provide regular communication that serves to |
| defined as a monetary value consequently, planning | | | | control and document the internal audit progress. |
| decisions mainly involve the intended degree of audit | | | | |
| assurance and the extent of audit work required to | | | | This audit approach is the mechanism for planning, |
| provide it. The requirements will vary from one | | | | executing, and controlling the internal audit function |
| organization to another and applicable laws and | | | | through periodic reports and appraisals as the internal |
| regulations. Some activities common to most audits: | | | | audit process progresses. |
| | | | | As discussed below in more detail, the phased audit |
| •Risk assessment | | | | approach consists of five phases: |
| •Defining Materiality | | | | |
| •Financial statement assertions | | | | • The planning phase; |
| •Financial analysis of cash flow statement | | | | • The organizing phase; |
| •Compliance and substantiate procedures | | | | • The preliminary phase; |
| •Analytical procedures | | | | • The conducting phase; and |
| | | | | • The reporting phase. |
| Meeting these objectives involves verification of: | | | | |
| | | | | Every phase of the internal audit development has |
| •Revenue | | | | definite requirements and produces specific |
| •Sales | | | | deliverables. |