Session 11 & 12

Auditing standard of I.A. & A.D. Prescribes: Auditor should report about weakness in Internal Control of management (Para 7.1.) Weakness in Internal Control will vary from entity to entity as per objectives of entity (Para 7.2) In audit of internal control as well as performance Audit significant weakness should be reported (Para 7.3) 3.2.1

Contd… To adhere to guidance of Auditing Standards, it is necessary that information generated in the entity as per the procedure laid-down are linked from origin to end to find-out that a particular transaction or group of transactions have executed in accordance with procedure prescribed and achieved its objectives 3.2.1

USA GAO Standards for Internal Control: USA General Accounting office in standards for internal control in Federal Government lays down guidance for information and communication as under: “Information should be recorded communicated to management and others within the entity who need it and in a form and within a time frame that enable them to carry out their internal control and other responsibilities”

Communications For an entity to run and control its operations, it must have relevant, reliable and timely communications relating to internal as well as external events. Information is needed throughout the agency to achieve all of its objectives

Programme Managers need data for: To determine that they are meeting theirs agencies strategic and annual performance plans and meeting their goals for accountability for effective and efficient use of resources

Communications Effective communication should occur in broad sense with information flowing down, across and up the organization. Management should ensure that there are adequate means of communications from external stake holders having significant impact on the agency achieving its goals

INTOSAI Internal Control Standards: A Pre-condition for reliable and relevant information is the prompt recording and proper classification of transactions and events. All transactions and significant events should be fully documented 3.2.6

Decisions is affected by –The quality of information –Appropriate decision needs timely, current, accurate and accessible information 3.2.7

Advantage of Information and Communications. This enable to evaluate performance of operations of the organizations on the following grounds: –Orderliness –Ethicality –Economy –Efficiency –Effectiveness 3.2.8

Transactions and event must be: Recorded promptly With proper classification of transactions and events To enable the management to make its use in preparation of reports, schedules and financial statements

Management’s ability to make appropriate decisions is affected by the quality of information which implies that the information is: –Appropriate (Is the needed information is there?) –Timely (Is it there when required?) –Current (Is it latest available?) –Accurate (Is it correct?) –Accessible (Can it be obtained early by relevant parties)

Documentation of the Internal Control System should include: Identification of an organizations structures and policies Its operating categories Related objectives and control procedures

Communications All Personnel should be informed that control responsibility should be taken seriously. They should understand their own role in the internal control system, as well as how their individual activities relate to the work of others. There also needs to be effective communications with external parties

Communication Information is a basis for communication which must meet the expectations of groups and individuals, enabling them to carry out their responsibilities effectively. Effective communication should occur in all directions, flowing down, across and up the organization, throughout all components and the entire structure

Communication Care must be taken to inform staff about:- Up to date performance Risk and functioning of internal conrol Relevant events and issues Feed back and a direction Behavioral expectations

Clear statement of the entity’s internal control philosophy and approach and delegation of authority. Their roles and responsibilities in effecting and supporting the components of internal conrol

Management should ensure that:- There are adequate means of communication with an obtaining information from external parties since external communications can provide in put that may have a highly significant impact on the extent to which the organization achieves its goals