Formulating Finding Pertemuan 09

2. Formulating Finding Pertemuan 09 Matakuliah : PSYCHOLOGY PEMERIKSAAN Tahun : 2009

3. Formulating Finding Session 09

4. Learning Objectives • Understanding about term of “finding” • Understanding about iceberg problems • Understanding about the characteristics of a competent evidence • Understanding about types of evidence • Understanding about the nature of deficiency findings • Understanding about the elements of deficiency finding • Understanding about the characteristics of a good finding

5. What is finding ? (1) • Finding is a specific condition detected by auditors during the process of audit. • “Deficiency findings describe condition or actions that are not what they should be – including systems that do not achieve desired objectives.” • “Deficiency findings also include actions that were taken improperly, action that should have been taken but were not, and action that should not have been taken but were” • “In short, deficiency findings are deviation from expected norms or established standards.” (Sawyer and Sumners)

6. What is finding ? (2) • Deficiency finding can be any deviation from rules, regulation, standards, or other criteria, and improper actions or no action that can bring about the company’s loss. • The problem detected should be having negative effect materially on the company’s finance and operation.

7. Beware of Iceberg Problem • What we find small and insignificant on the surface can be huge and materially significant underneath. • Do not be trapped in a symptom, but do have to find the real cause of the problem.

8. The Characteristics of Competent Evidence • Relevance • Independence of Provider • Effectiveness of Client’s IC • Auditor’s Direct Knowledge • Qualification of Individual Providing the Information • Degree of Objectivity • Timeliness

9. Types of Evidence • Physical Examination • Confirmation • Documentation • Analytical Procedures • Inquires of the Client • Reperformance • Observation

10. The Nature of Deficiency Finding • Transactions which cause large and tangible losses • Weakness in either systems or controls where losses cannot be explicitly shown but the possible of loss exist as they are usually continuing, • Weak controls can represent a greater risk to enterprise – even though specific dollar loss cannot be demonstrated. (Sawyer and Sumners)

11. Elements of Deficiency Finding • Standards – what the operation is supposed to accomplish • Condition – what the operation is actually accomplish • Procedures or practices – what people are supposed to do or what they are actually doing • Cause – why the deviation from standard is occurring • Effect – what is happening or could happen because conditions do not meet standards • Conclusion – what need to be corrected • Recommendation – how correction might be made. (Sawyer and Sumners)

12. Elements of Deficiency Finding • Condition – what the operation is actually accomplish • Standards/Criteria – what the operation is supposed to accomplish • Cause – why the deviation from standard is occurring • Effect – what is happening or could happen because conditions do not meet standards • Recommendation – how correction might be made. (BPKP)

13. The characteristics of a good finding • Significant enough to deserve being reported to management • Documented by facts, no opinions, and by evidence that is sufficient, competent, and relevant • Objectively developed without bias or preconceived ideas • Relevant to the issue involved • Convincing enough, so that conclusions are reasonable, logical, and based on the facts presented.