Lms - Gold Audit Scope - Module 2
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Raghu.GLms - Gold Audit Scope - Module 2
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Raghu.GINTERNAL AUDIT MODULE -2
INTERNAL AUDIT SCOPE
TYPES OF AUDIT FOR JEWELLERY SHOP
• STOCK AUDIT
• PROPRIETY AUDIT
• REVENUE AUDIT
• SURPRISE INSPECTION
• DESIGN/QUALITY AUDIT
• SURVELLIANCE / SECURITY AUDIT
• STATUTORY AUDIT
• SYSTEM/IT SOFTWARE AUDIT
• MIS AUDIT
INTERNAL AUDIT CHECKLIST
• 1. Initial Audit Planning
• 2. Risk and Process Subject Matter Expertise
• 3. Initial Document Request List
• 4. Preparing for a Planning Meeting with
Business Stakeholders
• 5. Preparing the Audit Program
• 6. Audit Program and Planning Review
• 7 . Conduct AUDIT as per Check List
INTERNAL AUDIT CHECK LIST
1. Initial Audit Planning
• All internal audit projects should begin with the team clearly
understanding why the project was put on the audit plan. The following
questions should be answered and approved before fieldwork begins:
• Why was the audit project approved to be on the internal audit plan?
• How does the process support the organization in achieving its goals
and objectives?
• What enterprise risk(s) does the audit address?
• Was this process audited in the past, and if so, what were the results of
the previous audit(s)?
• Have there been significant changes in the process recently or since the
previous audit?
INTERNAL AUDIT CHECK LIST
2. Risk and Process Subject Matter Expertise
• Performing an audit based on internal company information is helpful to
assess the operating effectiveness of the process’s controls. However, for
internal audit to keep pace with the business’s changing landscape and to
ensure key processes and controls are also designed correctly, seeking
out external expertise is increasingly becoming a best practice.
• At least one of the following should be used to evaluate the design of the
process audited:
• Subject Matter Expert (SME) from a Big 4 or other consulting firm
• Recent articles from WSJ.com, HBR.org, or other leading business
periodicals
• Relevant blog posts from The Protiviti View, RSM’s Blog, or the IIA’s blogs
• Once you have leveraged internal and external resources to identify
relevant risks, you will want to build an audit program that tests for these
risks.
INTERNAL AUDIT CHECK LIST
3. Initial Document Request List
• Requesting and obtaining documentation on how the process works is an
obvious next step in preparing for an audit. The following requests should be
made before the start of audit planning in order to gain an understanding of
the process, relevant applications, and key reports:
• All policies, procedure documents, and organization charts
• Key reports used to manage the effectiveness, efficiency, and process success
• Access to key applications used in the process
• Description and listing of master data for the processes being audited,
including all data fields and attributes
• After gaining an understanding of the process to be audited through the
initial document request, you should request access to master data for the
processes being audited to analyze for trends and to aid in making detailed
sampling selections.
INTERNAL AUDIT CHECK LIST
4. Preparing for a Planning Meeting with Business Stakeholders
• Before meeting with business stakeholders, internal audit should hold an
internal meeting in order to confirm the high-level understanding of the
objectives of the process or department and the key steps to the process. The
following steps should be performed to prepare for a planning meeting with
business stakeholders:
• Outline key process steps by narrative, flowchart, or both, highlighting
information inflows, outflows, and internal control components
• Validate draft narratives and flowcharts with subject matter experts (if any)
• Create an initial pre-planning questionnaire to facilitate a pre-planning meeting
with key audit customers
• Preparing the questionnaire after performing the initial research
sets a positive tone for the audit, and illustrates that internal audit is informed
and prepared. Once this research is completed, internal audit should meet
with their business stakeholders to confirm their understanding of the process.
INTERNAL AUDIT CHECK LIST
5. Preparing the Audit Program
• Once internal audit has confirmed their understanding of the process and risks
within the process, they will be prepared to create an audit program. An audit
program should detail the following information:
• Process Objectives
• Process Risks
• Controls Mitigating Process Risks
• Control Attributes, including:
– Is the control preventing or detecting a risk event?
– Control frequency (e.g. daily, weekly, monthly, quarterly, etc.)
– Does the control mitigate a fraud risk?
– Is the control manually performed, performed by an application, or both?
– An initial assessment of the risk event (e.g. high, medium, or low)
• Testing Procedures for Controls to be Tested During the Audit, including:
– Inquiry, or asking how the control is performed
– Observation, or physically seeing the control be performed
– Inspection, or reviewing documentation evidencing the control was performed
– Re-performance, or independently performing the control to validate outcomes
INTERNAL AUDIT CHECK LIST
6. Audit Program and Planning Review
• Audit programs, especially those for processes that have
never been audited before, should have multiple levels
of review and buy-in before being finalized and allowing
fieldwork to begin. The following individuals should
review and approve the initial audit program and internal
audit planning procedures before the start of fieldwork:
• Internal Audit Manager or Senior Manager
• Chief Audit Executive
• Subject Matter Expert
• Management’s Main Point of Contact for the Audit (i.e.
Audit Customer)
A SAMPLE CHECK LIST
• CASH VERIFICATION - it should be conducted
on the early hours of inspection , cash
balance as mentioned in cash book, physical
stock register and physical cash should agree.
Apart from the initial cash verification,
surprise checks too can be conducted
during the course of audit. And verification
details should be recorded in the Audit Note
book for the purpose of minuting the same in
audit report.
A SAMPLE CHECK LIST……
• TAKING THE PRINT OUT OF STOCK RECORDS –
FINISHED ORNAMENTS, SCRAP, PACKING MATERIALS ,
PANTRY, STATIONERY , GIFTS
• SCRUTINY OF PREVIOUS AUDIT REPORT
• VERIFICATION OF STATUTORY REGISTERS
• VERIFICATION OF EXHIBITION OF STATUTORY
LICENCES/REGISTRATION COPIES
• VERIFICATION OF VALIDITY OF EXHIBITED
LICENCES/REGISTRATION COPIES
• CONDUCTING TARE WEIGHT CHECKS OF WEIGHING
SCALE
A SAMPLE CHECK LIST
• CASH VERIFICATION - it should be conducted
on the early hours of inspection , cash
balance as mentioned in cash book, physical
stock register and physical cash should agree.
Apart from the initial cash verification,
surprise checks too can be conducted
during the course of audit. And verification
details should be recorded in the Audit Note
book for the purpose of minuting the same in
audit report.
INTERNAL AUDIT EXECUTION
Internal auditors who can create and document audit programs
from scratch — and do not rely on template audit programs —
will be more capable and equipped to perform audits over
areas not routinely audited. When internal audit can spend
more of their time and resources aligned to their
organization’s key objectives, internal auditor job satisfaction
will increase because they’ll be taking on more interesting
projects. The Audit Committee and C-suite may become more
engaged with internal audit’s work in strategic areas. Perhaps
most importantly, recommendations made by internal audit
will have a more dramatic impact to enable positive change in
their organizations.
ASSESSMENT TEST
A ) An internal audit system should be
dynamic ratherthan static /Rigid
1) True
2) False
ASSESSMENT TEST
B) Internal Audit safe guards assets and
effective use of resources
1) True
2) False
ASSESSMENT TEST
C) An Internal Auditor Should have business
knowledge, related rules and act, should
be able to assess the risk
1) True
2) False
ASSESSMENT TEST
d) An Internal Auditor mainly focuses on
internal controls and procedures , where as
a statutory auditor ensures the legal
compliances more
1) True
2) False
ASSESSMENT TEST
e) Audit Plan and Audit Check List are
immaterial for an Internal Audit system
1) True
2) False
ASSESSMENT TEST
F) Cash Verification should be done vis-a-vis
1) Computer statement – physical cash –
physical stock register – manual cash register
2) Computer statement – manual cash register
3) Physical stock register – Physcial cash –
4) Manual cash register and Physical cash
ASSESSMENT TEST
g) Internal auditor should discuss the Internal
audit report with the Branch head
/Custodian before submitting the same to
the Internal Audit Head
1) True
2) False
ASSESSMENT TEST
h) Internal Auditor should go through the
previous audit report and should not
ensure the compliance in the current audit
period.
1) True
2) False
ASSESSMENT TEST
i) Audit Plan and Audit Check List are
immaterial for an Internal Audit system
1) True
2) False
ASSESSMENT TEST
j) It is the duty of internal auditor to ensure
that cash is deposited into bank regularly,
during the course of audit
1) True
2) False