1. Operational Auditing Fall 2006 Professor Bill O’ Brien

2. Operational Auditing--Fall 20061-2 Roles of Internal Auditing  Auditing or assurance  System design & implementation  Performance appraisals  Consultations  Strategic planning  Merger & acquisition analysis  Market appraisals  Investment analysis

3. Operational Auditing--Fall 20061-3 Control Objectives  Safeguarding of assets  Compliance  Organizational goal & obj. achievement  Reliability and integrity of info  Economical & efficient use of assets

4. Operational Auditing--Fall 20061-4 Risk Categories: Evidence of Risk  Inadequate information  Failure to follow policies etc.  Loss of assets  Poor use of resources  Failure to achieve goals & objs.

5. Operational Auditing--Fall 20061-5 Organizational Relationship  Reporting responsibility As high as possible…the Audit Committee  Administrative responsibility To a key interested party

6. Operational Auditing--Fall 20061-6 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

7. Operational Auditing--Fall 20061-7 Effective Audit Committees  Independence  Skills balance  Time availability  Tough-mindedness  Clear charter  Specific duties  Maintain documentation

8. Operational Auditing--Fall 20061-8 Role of Audit Committes  Financial reporting  Corporate governance  Corporate control  Treadway Comm. Compliance Requires direct communication Audit plans EDP concerns Special areas of risk

9. Operational Auditing--Fall 20061-9 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

10. Operational Auditing--Fall 20061-10 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

11. Operational Auditing--Fall 20061-11 Establishing an I/A Function  Reporting structure  Mission statement/ role of dept.  Objectives  Department tone--teamwork  IIA standards  Commitment to continuing education