Operational Auditing--Spring Accounting Business Skills “The What” 4 Business perspective 4 Organizational focus 4 Bias for action 4 Communication excellence 4 People proficiency

Operational Auditing--Spring Financial Management Guidelines “The How” 4 Cc 4 KTT 4 MBWA 4 R ƒ R 3

Operational Auditing--Spring Human Relations Issues 4 General people techniques 4 Due professional care 4 Hostile management approaches 4 Dealing with external auditors 4 Participative approach w/auditees

Operational Auditing--Spring General People Techniques 4 Promote the “wanna” 4 Foster feedback 4 Adopt a consultative approach 4 Use the “Will Rogers’ Approach”

Operational Auditing--Spring …Due Professional Care 4 Be fair but don’t whitewash 4 Avoid surprises 4 Go for the win-win 4 Have the guts to go to the top

Operational Auditing--Spring Hostile Management Approaches 4 Select the right time for discussion 4 Remain flexible in your conclusions 4 Avoid emotion; sometimes even logic won’t work 4 Don’t corner yourself or the other party 4 Listen to the other party 4 Help the other guy “to be right”

Operational Auditing--Spring Dealing with the External Auditors 4 Different objectives 4 Different accountability 4 Different qualifications 4 Different activities

Operational Auditing--Spring Cooperation 4 Economy 4 Efficiency 4 Effectiveness 4 Advantages for the external auditor –Increases external auditor client insight –Improves client relations –Rotates emphasis 4 Advantages for the internal auditor –Improves training –Source of additional work –Increases professional knowledge –Independent appraisal source 4 Compliance with SAS 65

Operational Auditing--Spring SAS 65 4 Defines roles 4 Defines function 4 Discusses competency & objectivity 4 Considers nature of the work 4 Discusses coordination 4 Guidelines for evaluation 4 Role of direct assistance

Operational Auditing--Spring Typical Int. Audit Assistance 4 Design of control systems 4 Reduction of risk assessment 4 Reduction of substantive testing

Operational Auditing--Spring Create a Cooperative Bridge 4 Coordination 4 Risk assessment alert 4 Control system disclosure 4 Common sampling tools 4 Pooled IT knowledge 4 Different perspective 4 Constant general communication

Operational Auditing--Spring Participative Approach 4 Joint goals 4 Consultation 4 Joint authority 4 Open discussion re: findings 4 Open review of reports

Operational Auditing--Spring COSO Control Objectives 4 Economy & efficiency of operations 4 Reliable financial and operational data and reports 4 Compliance with laws and regulations

Operational Auditing--Spring Control Objectives 4 Reliability and integrity of info 4 Compliance 4 Safeguarding of assets 4 Economical & efficient use of assets 4 Accomplishment of goals & objs.

Operational Auditing--Spring Types of Control 4 Preventive 4 Detective 4 Corrective 4 Directive 4 Compensating

Operational Auditing--Spring Methods of Control 4 Organizational 4 Operational 4 Personnel 4 Review 4 Facilities

Operational Auditing--Spring Threats to Control 4 Management override 4 Open access to assets 4 Form over substance approach 4 Conflict of interest

Operational Auditing--Spring COSO Approach to Achievement 4 Sound control environment 4 Sound risk assessment process 4 Sound operational control activities –Are the processes working 4 Sound info & communications system 4 Effective monitoring

Operational Auditing--Spring Control Environment 4 Culture of integrity, ethics and competence 4 Overall mgt. philosophy 4 Proper authority & responsibility 4 Proper organization of resources 4 Proper training and development 4 Senior mgt. attention & direction

Operational Auditing--Spring Flowcharting Begin or End File Decide Document Activity

Operational Auditing--Spring What Is Storyboard Flowcharting? 4 New method for documenting a process. 4 Clean and simple flowcharting method. 4 Allows for clients and auditors to clearly understand process under review. 4 Simple technique that requires a good graphics package and a little imagination. 4 Can use Microsoft PowerPoint, Harvard Graphics, Corel Draw, etc. 4 Does not replace IS flowcharting.

The Basics of Storyboard 4 Meet with client and document process. 4 Use your imagination to choose/draw picture. 4 Under picture write narrative for each step represented. 4 Be creative - good control narrative in green; poor controls in red. 4 Completed storyboard must be reviewed with client. 4 Make any changes necessary. 4 Final copy should be in color for most effective presentation. 4 Different process may require different approach.

Operational Auditing--Spring How to Storyboard Meet with client and document process. From client interview create storyboard. A A Print out story board - black and white draft and color for final. Review storyboard with client and obtain sign off.

Operational Auditing--Spring Start Customer Service Rep Receives Order Scan Form Into System Shipping Files Yellow Customer Service Rep Researches And Corrects Information Shipping Pulls And Packs Orders End By Phone? By Mail or Fax? On Standard Order Form? Shipping Sends Order and Green Copy (Invoice) Customer Service Rep. Key Enters Data on-Line Approved By Manager? Send to Special Order Department Print Three-Part Shipper Yellow and Green To Shipping Department Pink to Accounts Receivable Department YES NO YES Company XYZ Order-fulfillment process NO

Operational Auditing--Spring A A Customer Representative Receives orders by fax or mail. Receives orders by phone. Standard orders are scanned into system. Customer Representative enters order data on-line. A three-part packing slip is printed per order. Pink copy sent to accounts receivable department. Company XYZ Order-fulfillment process Packing slip approved by Manager. If not approved, returned to Customer Representative for correction Packing slip Yellow and green copy go to shipping department. Shipping pulls and packs orders. Yellow copy filed in shipping department. Green copy sent with order.