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What to Expect if you are Audited
Susan Fleener, 10/18/06
Intro to Internal Audit
□Direct report to President □Mission: To provide the University
with an independent appraisal of it's financial, operational, and control activities.
□Link to Audit docs: http://
www.indiana.edu/~iuaudit/publications.html
Intro to Audit Staff
□12 staff - With various certifications: CPA, CIA, CFE, CISA
□System-wide with staff located at BL, IUPUI, and SB
□Link to Internal Audit org charthttp://www.indiana.edu/~iuaudit/orgchart.html
□Audit team will be 1- 4 staff
How does a unit get on “the list”?
□Annual audit plan□Fraud, allegation, etc.□Change in Dean, Director,
Chancellor, etc.□Request □Required by external – ex: NCAA
The Audit
□Preliminary – Meet staff, do the research, obtain docs
□Fieldwork – Create plan to test areas noted in Prelim.
□Report – Findings and recommendations
□Follow up – 12 months after Report □Audit Process link – http://www.indiana.edu/~iuaudit/process.html
Audit Process - Prelim1
□Announcement Letter - objectives, time frame, audit team
□Entrance Meeting - Meet the staff, discuss plan, identify contact person and time line.
□Overall risk assessment – □Risk = things that can go wrong
Audit Process – Prelim2
□ Request of documents□ Organization chart □ Job descriptions – basic info on who does
what □ Procedures manuals, if available□ List of all sources of funds/revenues □ List of physical locations□ Financial statements□ Recent reviews by IU or external
Audit Process - Prelim3
□Audit staff will contact relevant admin depts for information – Treasury, FMS, C&G, Auxiliary, Risk Management, etc.
□Review IUIE reports□Payroll transactions□Expenditures/revenue transactions□Vendor □Accounts Receivable□5 year account balance analysis
Audit Process - Prelim4
□May send questionnaire to unit, audit staff will review and discuss with unit
□After review of unit provided doc, questionnaire and standard IUIE reports:□Meet with staff to document process
and controls*□Discuss any issues noted in review□Observe staff and overall operation
Audit Process – Prelim5
□Based on prior work, note areas that:□may be of concerns due to type of
process, ex: large amounts of cash□may be missing needed controls, ex:
reconciliation, review, approvals, separation of duties
□Conclude in the Risk Assessment
Red Flags – Things that catch our eye.
□Fluctuation in balances over 5 years□Account use – ex. 68-clearing□Object code use – ex. 8119□Negative balances – cash, expenditures□Collection of cash □Overtime – patterns and/or lots of it□Lack of PTO□Travel and P-cards□Lack of physical security for confidential
data
Questions?
Audit Process – Fieldwork1
□Test of Transactions*□Payroll
□Patterns or unusual overtime□Time sheets, PTO card, etc.□We trace the pay received to the supporting docs –
time card, overtime approval, etc.
□Disbursements□Sample of transactions – review of supporting docs□Travel and the Travel card – review for appropriate
approval, business reason, receipts□P-card – reconciliations, receipts, business use
Audit Process – Fieldwork2
□Test of Transactions - continued□Revenue
□Types of funds received, method revenue collected□Review collection process □Review deposit process – follow several days from
receipt of funds to GL□Review reconciliations
□Capital Assets□Review of asset inventory□Trace assets to the CAMS list
□C&G□Select sample of transactions to verify if allowable on
grant.
Audit Process – Fieldwork3
□Other□Information Systems
□Specialized review of overall IS for the unit – this is done by our IS Auditor
□Operations□Throughout the audit, opportunities to
enhance efficiency may arise.
□Physical security for staff, assets and data□Overall assessment of security
Audit Process – Fieldwork4
□Findings – Issues found that need to be changed, improved or corrected□Determine the materially of each finding
□Several minor findings in one area may indicate a larger problem
□Findings are “weighed” by: $$, safety, public relations effect, likelihood of occurring
□Recommend a corrective plan and solicit a corrective action plan from the unit
□Levels of Findings□Report□Management Letter □Verbal
Audit Process – Reporting1
□During the audit, Interim Audit Communications may be used to discuss findings and solicit corrective action plan
□The draft report is a compilation of:□report-level findings□Internal Audit recommendations□Unit action plan responses
□The draft will be sent to the unit for review and discussion at the exit meeting.
□The draft report is almost always edited due to discussion between the unit and audit staff.
Audit Process – Reporting2
□After edits and conversation with the unit, the draft report will be finalized and sent out.
□Final audit reports go to:□President□Board of Trustees□Relevant University Administrators□Chain of management for the unit□Related departments that have been identified
in the report
What do you need to do?
□Up to date?□Organization chart □Job descriptions □Procedures manuals
□If requested, can you produce the list of documents?
□Is there “proof” that the process works as written in the procedure manual?
Questions?
Wrap Up
□Questions, concerns, comments – give us a call or email.□Kate Bowman – Admin Asst 855-3361□http://www.indiana.edu/~iuaudit/□Susan Fleener 855-5372;
[email protected]□We are available.