Department of the Navy Operational Audits Mr. Richard Leach Auditor General of the Navy June 3, 2010 What Comptrollers Need to Know photo by 2nd Class Kristopher Wilson

2 Audit Environment Team Effort At Every Level –Ranging from Intern to Senior Eliminate Misconceptions –Auditors do not set standards –Standards set by AICPA, GAO, FASB, FASAB –Holding DON to higher standards than private sector Technology Is Key –Enterprise Resource Planning –Business Process Transformation Consistent Level Of Effort –Create a culture of continuity –Not sporadic, not periodic

3 Critical Internal Controls Control Environment –Tone at the Top –Operational/Financial Teamwork Functional Managers Financial Managers Senior Leadership Policies & Procedures –Assure continuity of operations Vulnerabilities/Weaknesses –Identify and correct Monitor –What is measured gets done photo by Airman Neil H. F. Sheinbaum

4 Existence Testing Observation Reconcile Balances –Physical Inventories vs. Accounts Confirmations (3 rd Parties) Ownership –Impact of Joint Basing and Commands –eCommerce photo by Mass Communication Specialist 2nd Class Mark Logico

5 Completeness Testing All Appropriate Transactions Available –Management Reports Reconciliations –Inventories Additions/Deletions Substantive Field Testing –Physical verification of source documents and assets photo by Mass Communication Specialist 1st Class Geronimo Aquino

6 Source Document Evidence Transaction Level Data – Physical or Electronic –Who, What, When, Why Fully Supported –Authorization –Proof of Receipt –Invoice –Payment Authorization –Item location Suite of Internal Controls within Processes –Separation of functions –Policies/Procedures/Assessments/Monitoring photo by Command Master Chief Charles Grandin

7 The Goal: Sustainment Maintaining operational excellence and audit readiness condition through the execution of regular, consistent, well controlled (internal controls) business processes photo by Photographer’s Mate 1st Class David M. Tilton