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INTERNAL AUDIT REPORTS

INTERNAL AUDIT REPORTS. Parity Twinomujuni CIA Makerere University Internal Audit Department. Session Coverage . Challenges with Internal audit reports Consumers of internal audit reports Report structure Guidance for efficient reporting. The Standard. 2400 – Communicating Results

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INTERNAL AUDIT REPORTS

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  1. INTERNAL AUDIT REPORTS Parity Twinomujuni CIA Makerere University Internal Audit Department

  2. Session Coverage • Challenges with Internal audit reports • Consumers of internal audit reports • Report structure • Guidance for efficient reporting

  3. The Standard 2400 – Communicating Results Internal auditors must communicate the engagement results. This communication is usually in form of audit reports

  4. What are the common challenges with our reports • Scoping is often not formally communicated to Auditees • Reports are too voluminous and complex and in some cases too short • Time taken to publish reports – completion of fieldwork to reporting • Reports that are not supported by evidence

  5. Common challenges • Drafting / sometimes English – too much jargon • Over emphasis of issues • Personalizing reports • Negative language • Poor flow – non critical issues emphasized and critical issues left out etc

  6. Understanding the user needs • Who reads our reports? Mgt, Audit Committee, Other stakeholders, • What are their uses of the report? • What kind of message do they seek? • How can we ensure that our reports are actionable? • How can we incorporate value addition in reporting?

  7. Guidance on scoping 2201.C1- Internal auditors must establish an understanding with consulting engagement clients about objectives, scope, respective responsibilities, and other client expectations. For significant engagements, this understanding must be documented.

  8. Common Report Structure • Executive Summary • Detailed Report – Audit Observations • Appendices

  9. Executive Summary • Objectives • Scope • Opinion or Conclusions What about the Background

  10. Executive Summary: Objectives • What did the audit aim to accomplish? • Why did you perform the audit?

  11. Executive Summary: Scope • What did the audit cover and, if necessary, what did it not cover and why? Period and Area

  12. Executive Summary:Opinion or Conclusions • What are the causes of the conditions and how severe are the effects? • What is really wrong (or right) and how bad(or good) is it?

  13. Internal audit reports Findings • An internal audit report is a collection of findings that an auditor identifies during the engagement process.

  14. Components of an Audit finding • The five components of audit reporting are: • Criteria • Conditions • Causes • Effects • Recommendations and/or Action Plans

  15. Example • Criteria • Company policy requires that all payments above Ushs 1,000,000 should be approved by the CEO • Condition • In a sample of 100 payments above Ushs 1,000,000 paid during the month of June 2009, 30 were paid without CEO approval.

  16. Example Continued • Cause • Thresholds for approval of payments were not being monitored and followed on a daily basis. • Effect • Payment procedures are not being adhered to. There is a likelihood that fraudulent payments can be made.

  17. Example Continued • Recommendations • All payments that were made without CEO approval should be compiled for CEO ratification. Any payments that the CEO will find irregular should be investigated further by the investigation unit. • All future payments should follow approved payment procedures

  18. Action / Management response • We agree with the finding. The Finance Manager shall compile all payments affected and have approvals ratified by December 31, 2009. The CFO has agreed not to sanction any future payments without proper approvals.

  19. Writing-Quality Guidance 2420 – Quality of Communications • Communications must be accurate, objective, clear, concise, constructive, complete, and timely.

  20. Interpretation • Accurate communications are free from errors and distortions and are faithful to the underlying facts. • Objective communications are fair, impartial, and unbiased and are the result of a fair-minded and balanced assessment of all relevant facts and circumstances. • Clear communications are easily understood and logical, avoiding unnecessary technical language and providing all significant and relevant information. • Concise communications are to the point and avoid unnecessary elaboration, superfluous detail, redundancy, and wordiness.

  21. Interpretation • Constructive communications are helpful to the engagement client and the organization and lead to improvements where needed. • Complete communications lack nothing that is essential to the target audience and include all significant and relevant information and observations to support recommendations and conclusions. • Timely communications are opportune and expedient, depending on the significance of the issue, allowing management to take appropriate corrective action.

  22. Writing-Quality Issues • Coherence • Handling of technical terminology • Readability and conciseness • Sentence clarity

  23. Technical Terminology Strategies • Replace unnecessary technical terms • Define necessary technical terms • Manage the number and definitions of acronyms and abbreviations • Include a glossary • Shorten the sentences

  24. Readability Factors Text Factors Affecting Readability • Sentence length • Word difficulty • Coherence • Placement of the main messages • Layout and graphic design

  25. Human Factors Affecting Readability • Reading skill • Content knowledge • Attitude • Environment

  26. Readability and Conciseness Strategies • Break up long sentences • Replace difficult, unfamiliar words • Eliminate redundancy • Eliminate wordiness

  27. Report Formats • Mapped or table formats • Paragraph formats • Electronic-delivery formats

  28. Mapped or Table Format • Allows easy navigation for the reader • “Builds in "the logic • Eases the writing • Encourages conciseness

  29. Paragraph Format • Enables more coherence • May better meet expectations in some organizations

  30. Electronic-Delivery Formats • Allow easy navigation for the reader • “Build in”the logic • Ease the writing

  31. Ratings • Can be applied to the entire engagement and/or to each audit observation • What is rated? • Overall internal-control rating • Risk

  32. Overall Internal-Control Rating • Two-point rating • Unsatisfactory • Satisfactory • Three-point rating • Unsatisfactory • Needs improvement • Satisfactory • Four-point rating • Unsatisfactory • Needs significant improvement • Needs improvement • Satisfactory

  33. Risk Rating • High • Medium • Low

  34. Conclusion • We need to write actionable reports • Understand who the consumers of our reports are • Use Report structures that are agreeable and easy to read and navigate • Include graphics into our reports • Work on the tone, address critical areas and make our reports as friendly as possible.

  35. End Parity Twinomujuni CIA ptwino@nhcc.co.ug, parityt@yahoo.com +256717771665

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