1. Internal Audit - A Comprehensive Risk Management tool Understanding Document

2. Increasing Capital investments
Strategic initiatives have significant impact on operational and tactical decisions
Increasing Capital investments
People
Impacts
STRATEGY
Process
Effective
Project
Management
Technology
Global Funding
Internal Audit function therefore needs to clearly understand the strategic plans of Management and plan assignments around three broad dimensions - People, Process and Technology

3. People Process Technology
Critical areas that need to be focused during such internal audits can be categorized under these three spheres
People
Process
Technology
Organization roles and relationship
Change in job descriptions
New KPIs and performance measurement systems
Technology savviness
Training on new software
Roles in ERP
Internal controls in a fully automated environment
Standard operating procedures
Customer accounts reconciliation status
Inter-office transactions
Employee related transactions like PF, ESI
IT Strategy vs. Business growth
Data conversion
Mapping business processes to IT
Marrying standard operating procedures to Oracle functionalities
IT Organization
IT Controls – authorization

4. Process Process Process
Critical areas that need to be focused during such internal audits can be categorized under these three spheres
Process
Process
Process
Control, valuation and effective project management relating to Capital Work in Progress
Verification of capital work in progress
Assistance in Royalty and Technical Know-How Payments
GOs – verification, follow up and analysis of consequential effect on operational transactions
Treasury related processes
Bank reconciliation
Deposit of customer collection
Inventory control
Processes relating to advances – control account vs. subsidiary ledgers
MIS - Reporting mechanisms, data integrity etc
Taxation related processes such as
TDS
Annual taxation
Income exemption
Costing systems

5. Internal audit, thus can be positioned as a risk management tool to support top and middle management in their pursuits
Traditional Audit
Management Audit
Traditional audit focused on
Correctness of recording information
Completeness
Accounting related controls
Proprietary aspects relating to delegation of authority
Pre-computerization, business transactions left behind a trail. This enabled business managers to track origination, changes and implication easily
Internal audit assumes a “business consulting/ advisory function”
Stretches into the realm of management audit
Critical Risk Management Tool
As lower management jobs have been redundant and more “rules-driven”, the portion of management audit has increased

6. Illustrative audit scope
New dimensions add to the complexity of audit and skills required in executing such assignments
Illustrative audit scope
Review of Corporate Governance Machinery
Review of Information Technology areas
Review and redesign of Management Info Systems
Human Resources optimization (Time Motion Studies etc)
Tax management and consulting
Cost and Resource Optimization
Supply chain management
Review of Project Management systems
Social responsibility audit
In order to ensure optimal delivery, the function needs to be resourced with multi-dimensional personnel having exposure in areas such as accounting, business advisory, technology, energy-saving, cost reduction etc

7. Best practices in Internal audit need to be implemented to harness maximum from such assignments
Sync with the long term business strategy and objectives
Project management structure and approach
Project Sponsor (Members from Top Management)
Project Review layer (Partners of the Audit & Consulting firm and Top/Middle Management)
Project execution layer (Consultants + Employees from Metro Water)
Quality control layer (Audit & Consulting firm partner)
Determine scope along with Client team considering
Strategic intent and plans
Client needs and priorities
Findings of internal control diagnostics
Diagnostic phase carrying out internal control review and As-Is mapping
Continuous communication strategy
Project Team – a mix of client and consultant members
Cost benefit analysis
Agreeing on KPI of exercise and regular monitoring of performance
Use of special resources
Management Graduates
Engineers
Information Systems specialists

8. This template throws light on the broad scope of an ideal Internal Audit assignment
Internal control review for the following processes
Purchase to pay cycle
Order to receive cycle
Review of IT Systems/ Processes
Role conflicts in IT
MIS Functionality used vs. EXCEL reports
Review of IT Organization/ roles
Customer satisfaction processes
Purchase Transaction audit