1. Operational Auditing--Spring 2008 1 Operational Auditing Spring 2008 Professor Bill O’ Brien

2. Operational Auditing--Spring 2008 1-2 Roles of Internal Auditing n Auditing or assurance n System design & implementation n Performance appraisals n Consultations n Strategic planning n Merger & acquisition analysis n Market appraisals n Investment analysis

3. Operational Auditing--Spring 2008 1-3 Control Objectives n Safeguarding of assets n Compliance n Organizational goal & obj. achievement n Reliability and integrity of info n Economical & efficient use of assets

4. Operational Auditing--Spring 2008 1-4 Risk Categories: Evidence of Risk n Inadequate information n Failure to follow policies etc. n Loss of assets n Poor use of resources n Failure to achieve goals & objs.

5. Operational Auditing--Spring 2008 1-5 Organizational Relationship n Reporting responsibility n As high as possible…the Audit Committee n Administrative responsibility n To a key interested party

6. Operational Auditing--Spring 2008 1-6 Audit Committee History n NYSE: Suggests in 1940 n AICPA: Recommends in 1967 n FCPA: Strong imperative in 1977 n Treadway: Recommends requirement in 1987 n Blue Ribbon Committee-1999 n Sarbanes-Oxley Act-2002

7. Operational Auditing--Spring 2008 1-7 Effective Audit Committees n Independence n Skills balance n Time availability n Tough-mindedness n Clear charter n Specific duties n Maintain documentation

8. Operational Auditing--Spring 2008 1-8 Role of Audit Committes n Financial reporting n Corporate governance n Corporate control n Treadway Comm. Compliance n Requires direct communication n Audit plans n EDP concerns n Special areas of risk

9. Operational Auditing--Spring 2008 1-9 Interaction with Auditors n Evaluate I/A staff n Review audit philosophy n Review control systems n Review plan and financial impact n Multi-year coverage comparison n Provide special requests n Assure free access for I/A n Support I/A independence n Oversight for logistics and status

10. Operational Auditing--Spring 2008 1-10 Ops. Audit as a Profession n Professional attributes n Exam n Standards n Statement of responsibilities n Inst. of Internal Auditors n Professional leadership n Technical resources and training n Code of ethics

11. Operational Auditing--Spring 2008 1-11 Accounting Business Skills “The What” n Business perspective n Organizational focus n Bias for action n Communication excellence n People proficiency

12. Operational Auditing--Spring 2008 1-12 Financial Management Guidelines “The How” n Cc n KTT n MBWA n R ƒ R 3