Operational Auditing Fall 2006 Professor Bill O’ Brien

Operational Auditing--Fall Roles of Internal Auditing  Auditing or assurance  System design & implementation  Performance appraisals  Consultations  Strategic planning  Merger & acquisition analysis  Market appraisals  Investment analysis

Operational Auditing--Fall Control Objectives  Safeguarding of assets  Compliance  Organizational goal & obj. achievement  Reliability and integrity of info  Economical & efficient use of assets

Operational Auditing--Fall Risk Categories: Evidence of Risk  Inadequate information  Failure to follow policies etc.  Loss of assets  Poor use of resources  Failure to achieve goals & objs.

Operational Auditing--Fall Organizational Relationship  Reporting responsibility As high as possible…the Audit Committee  Administrative responsibility To a key interested party

Operational Auditing--Fall Audit Committee History  NYSE: Suggests in 1940  AICPA: Recommends in 1967  FCPA: Strong imperative in 1977  Treadway: Recommends requirement in 1987  Blue Ribbon Committee-1999  Sarbanes-Oxley Act-2002

Operational Auditing--Fall Effective Audit Committees  Independence  Skills balance  Time availability  Tough-mindedness  Clear charter  Specific duties  Maintain documentation

Operational Auditing--Fall Role of Audit Committes  Financial reporting  Corporate governance  Corporate control  Treadway Comm. Compliance Requires direct communication Audit plans EDP concerns Special areas of risk

Operational Auditing--Fall Interaction with Auditors  Evaluate I/A staff  Review audit philosophy  Review control systems  Review plan and financial impact  Multi-year coverage comparison  Provide special requests  Assure free access for I/A  Support I/A independence  Oversight for logistics and status

Operational Auditing--Fall Ops. Audit as a Profession  Professional attributes Exam Standards Statement of responsibilities  Inst. of Internal Auditors Professional leadership Technical resources and training  Code of ethics

Operational Auditing--Fall Establishing an I/A Function  Reporting structure  Mission statement/ role of dept.  Objectives  Department tone--teamwork  IIA standards  Commitment to continuing education