INTERNAL AUDIT AUDIT MANUAL

Transcription

1 INTERNAL AUDIT AUDIT MANUAL Version November 2012 Not to be copied or reproduced without the permission of the Director Internal Audit, Curtin University.

2 Table of Contents FOREWORD General Policies & Standards Audit Charter Auditing Standards IIA Professional Practices Framework Other External Standards General Standards - Summary Qualifications of Audit Staff Reasonable Professional Care Independence Confidentiality Evidence Adequate Documentation Operating Standards - Summary Planning Supervision Statutory and Regulatory Requirements Internal Controls Reporting Audit Management Responsibilities Organising Directing Controlling Audit and Compliance Committee Charter Personnel & Administration General Procedures Commencement of an Audit Conduct of an Audit Personnel The Auditor Internal Audit Area - Organisation Structure Administration Page 2 of 57

3 2.3.1 Audit Procedures Area Expenditure Management Reporting Hardcopy Audit Documentation Electronic Working Papers Time Usage Analysis Timesheets Audit Planning Planning Summary of Planning Process Strategic Audit Plan Introduction Purpose Developing a Strategic Audit Plan Identification of Auditable Areas Risk Ranking Annual Audit Work Plan Introduction Considerations for Planning Planned Audits Spreadsheet Field Audit Plan General Audit Methodology The Audit Cycle Summary Introduction Planning and Administration Review and Evaluation Verification Reporting Follow-up Audit Programs Introduction Structure Audit Objectives and Scope Page 3 of 57

4 Controls and Risks Sections Standard General Section Conduct of Audit Testing Communication with Auditee Working Papers - General Rationale Structure Audit Reports Philosophy Audit Report Structure The Reporting Process Working Paper Review Introduction Procedures Flowchart Documentation Introduction Audit Sampling General Testing Template Major Project Development Audits Audit Objectives General Audit Objectives Audit Approach General Audit Scope Audit Deliverables Major Project Development Audit Working Papers General System Documentation Introduction System Description Identification of Risks and Controls Audit Evaluation and Performance Page 4 of 57

5 6.1 Audit Client Questionnaire Form General Performance Reviews - KRIs and KPIs General Miscellaneous LAN Permanent File Naming Standards - Effective 1 May 2003 to 30 June 2012 (now replaced by CCH TeamMate) General Important LAN Directories/Files Subdirectories Other Special Audit Work Audit Certificates General Preferred External Service Providers Special Investigations Introduction Forms and Templates List Introduction Time Recording Timesheet Section 1 - Planning and Evaluation Notification of Audit Commencement (example) Audit Checklist (two pages) Field Audit Plan (two pages) Audit Engagement Letter (usually four to five pages) Internal Audit Request IAR (one page) List of CAATs (one page) PANA (one page) Reference File System Description (up to three pages) Audit Budgeted Hours Estimate Sheet (one page) Section 2 - Reporting Draft Audit Report Covering Memo (one page) Audit Observations (variable no. of pages) Main Audit Report (variable no. of pages) Page 5 of 57

6 9.4.4 Audit Client Questionnaire (one page) Hardcopy Cover Sheet for Official Records File (one page) Section 3 - Verification General Other Major Project Development Checklist (available on request) Major Project Development Report (available on request) NOTE: the official Internal Audit Manual is found on J drive at J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Procedures\Internal Audit Manual\2011 Onwards FOREWORD The purpose of this manual is to provide Curtin University Audit staff with a source of reference for general audit procedures and routine, in accordance with the Audit Charter (refer Section 1.1). Any instruction contained herein which is inconsistent with Curtin University's internal policies and procedures is void to the extent of that inconsistency. Page 6 of 57

7 1.0 General Policies & Standards 1.1 Audit Charter The Internal Audit Charter establishes the purpose, authority and responsibilities conferred by the Council of Curtin University ( the University ) on the Internal Audit area, with respect to the carrying out of internal auditing duties. The Internal Audit Charter may be found on the Curtin University Internal Audit website here. 1.2 Auditing Standards IIA Professional Practices Framework To assist auditors in achieving an acceptable level of performance, The Institute of Internal Auditors (IIA), an international body, has issued the International Professional Practices Framework (IPPF) which is intended to be used throughout the world in the conduct of internal audit assignments. Refer to the IIA website for further information. The IPPF provides internal audit professionals worldwide with authoritative guidance which is both mandatory and strongly recommended in nature. The three mandatory elements of the IPPF are: Definition of Internal Auditing Code of Ethics International Standards for the Professional Practice of Internal Auditing (Standards) Conformance with the principles set forth in mandatory guidance is required and essential for the professional practice of internal auditing. The Internal Audit Charter contains a definition of internal auditing that is in alignment with the IPPF i.e. The basic objective of Internal Audit is to provide independent, objective assurance and consulting services designed to add value and improve the University s operations. Section 9.2 of the Internal Audit Charter states that the Director Internal Audit will ensure: and compliance with professional standards, as laid down by the Institute of Internal Auditors (IIA) i.e. the International Standards for the Professional Practice of Internal Auditing; compliance with the IIA Code of Ethics Page 7 of 57

8 1.2.2 Other External Standards In specific areas of specialisation, such as audits of financial records and audits related to computerbased systems and functions, other authoritative bodies have issued audit statements and guidelines. In particular, the Australian accounting bodies have issued statements on auditing standards and practices, having regard to generally accepted principles applying in both the public and private sector, for audits of financial statements. The Information Systems Audit and Control Association (ISACA), another international body, has developed standards for Information Technology auditing. Section 9.2 of the Internal Audit Charter states that the Director Internal Audit will ensure where applicable, that regard is had for auditing standards and practice statements issued jointly by CPA Australia and the Institute of Chartered Accountants in Australia, and standards issued by ISACA General Standards - Summary General auditing standards in operation for Internal Audit at Curtin University are in alignment with the above referred external standards: Qualifications of Audit Staff Audits must be performed by or under the supervision of a person or persons having the managerial, technical and perceptive skills possessed by an experienced and competent internal auditor. Requirements for staff performing audits are: General: Knowledge of auditing theory and practice and the education, ability and experience to apply such knowledge to a variety of auditing assignments. Knowledge and understanding of the operations of the organisation acquired through education and experience. Knowledge of management principles and practices. Specific: A level of experience and appropriate qualifications to perform as a competent internal auditor. For audits of financial statements appropriate qualifications providing a detailed understanding of accounting standards concepts, principles and practices. For audits of computer-based systems and environments appropriate qualifications providing a detailed understanding of computing concepts, principles and practices. Page 8 of 57

9 Reasonable Professional Care Auditors must take reasonable professional care in specifying evidence required, in gathering and evaluating the evidence and in reporting findings. The standard requires professional performance of a quality appropriate to the complexities of particular audit assignments. It imposes upon auditors the need to be alert for situations, control weaknesses and transactions which could be indicative of fraud, improper or unlawful expenditure, unauthorised operations, waste and inefficiency. In determining which audit tests and procedures are to be applied to achieve reasonable professional care, the following matters are relevant: Requirements to meet audit objectives. Relative materiality of matters to be investigated. Prior knowledge of the effectiveness of the systems of internal control. Estimate of costs of implementing internal audit plans in relation to likely benefits to be derived Independence Independence is essential to the effectiveness of Internal Auditing. This independence is obtained primarily through organisation status and objectivity. The organisational status of the Internal Auditing function, and the support accorded to it by management, are the major determinants of its effectiveness. The Director Internal Audit, therefore, is responsible to the Audit and Compliance Committee whose authority is sufficient to ensure both a comprehensive range of audit coverage, and the adequate consideration of, and effective action on, the audit findings and recommendations. Whilst the auditor may recommend standards of control for systems or review procedures before they are implemented, the design, installation and operation of systems or drafting of procedures for systems are not an Audit function. Performing such activities is presumed to impair audit objectivity and could be seen to be displacing the role of management Confidentiality Information acquired by an auditor in the course of audit duties must not be used for purposes outside the scope of assessment and formation of an opinion and in reporting according to audit responsibilities. It is essential that the auditor maintain confidentiality regarding audit matters and information arising from audit tasks. Page 9 of 57

10 Evidence Auditors must obtain all evidence necessary for the effective completion of the audit. The decision on how much evidence is enough and what type to seek requires the exercise of the auditor s judgement based on experience, education, reasoning and intuition. A thorough knowledge of the concepts underlying audit evidence will help the auditor to improve the audit quality and efficiency. Evidence needed to support the auditor s findings may be: Physical evidence obtained by observation and enquiry; Testimonial evidence from interview and statements from involved persons; Documentary evidence consisting of legislation, reports, minutes, memoranda, etc., contracts, extracts from accounting records, formal charts and specifications of documentation flows, systems design, operations and organisation structure; and Analytical evidence secured by analysis of information collected by the auditor. Regardless of the type, the evidence involved should meet basic tests of sufficiency, competence and relevance. The audit working papers should reflect the details of the evidence upon which the auditor has relied or include copies of papers containing the evidence Adequate Documentation Auditors must provide adequate documentation of the audit, including the base and extent of planning, the work performed and the results and findings of the audit. Adequate documentation of audit planning, methods, procedures, findings and results is necessary in order to maintain an acceptable level of auditing service by providing: The Director Internal Audit with an adequate basis and sufficient evidential material to support any opinions expressed in the Audit Reports; Evidence of the achievement of the required standard of audit performance; An effective link between successive audits; and A basis for quality assurance reviews. Specifically, the following documentation is relevant and should be retained on file: Planning procedures; Information provided by the client or other parties that is significant to the findings or the recommendations; Page 10 of 57

11 Principal procedures and findings to the extent that these are not documented in the final report; Evidence of review of work papers by the Director Internal Audit; and Client correspondence and reporting, including the final report (NOTE: only the first draft and final copy of the report need to be kept on file). Documentation that is not referred to in the working papers or report findings is not to be retained on file Operating Standards - Summary Operating auditing standards in operation for Internal Audit at Curtin University are in alignment with the above referred external standards: Planning An audit plan must be prepared and revised as necessary in the course of an audit to cover all material areas under examination. This standard requires sufficient advance planning to provide a basis for effective audits. This is the first step towards effective and efficient utilisation of staff time. The audit planner is expected to be thoroughly familiar with the operations of the organisation and be concerned broadly with medium to long-term horizons to ensure systematic and adequate coverage of activities over time Supervision Where work is assigned to members of an audit team, each member must have sufficient proficiency and training to carry out assigned tasks. Their work must be carefully supervised and reviewed. The most effective way to control quality and to expedite the efficient and effective progress on an assignment is by supervision from the beginning of preparatory work to the completion of the report in draft form. In particular, the Director Internal Audit is required to oversee and assess the audit work program and audit budget throughout the course of each audit. In addition, it is the Director Internal Audit s responsibility to approve any change to the audit budget or deviation from the audit work program on each audit Statutory and Regulatory Requirements One specific aspect to be covered is a review of compliance with statutory and regulatory requirements, organisation plans and policies, directives and procedures. Page 11 of 57

12 This standard places an onus on the auditor to advise management of any instances where the organisation has not complied with pertinent laws and regulations. In reviewing compliance, the auditor should examine enabling legislation and general regulations as appropriate Internal Controls The system of internal control is conceptual in nature. It is the integrated collection of control mechanisms used to achieve desired results. A control is any mechanism or practice used to enhance the probability that required results will be achieved. Internal auditors must systematically evaluate the nature of the organisation s operations and systems of internal control to assess the extent to which they may be relied upon to: Ensure the integrity of management data; Ensure that the organisation s assets are safeguarded; Ensure compliance with policies, plans, procedures, standards, laws and regulations; and Promote effectiveness, efficiency and economy in organisational practices. Internal controls comprise the plan of organisation and the methods and measures adopted to safeguard assets, comply with laws and regulations, check the accuracy and reliability of management data, promote operational efficiency and encourage adherence to prescribed managerial policies. These controls embrace the policies, procedures and practices established by management as well as the plan of organisation and other measures intended to promote and facilitate their implementation. Internal control is the whole system of control, financial or otherwise, established by management in order to carry on the business of the organisation in an orderly manner. The characteristics of a sound system of internal control include: A plan of organisation providing segregation of responsibilities and duties appropriate for safeguarding the organisation s resources, and accountability for the economical and efficient utilisation of such resources; A system of authorisation and recording procedures adequate to provide control over resources; Sound, formal practices to be followed in the performance of duties and functions of each of the organisational units; Procedures to ensure the selection of personnel of a quality commensurate with their responsibility; and Page 12 of 57

13 Checks and balances to ensure desired results are achieved. Types of control include: Management; Organisation; Accounting; and Physical controls. A complete review of internal controls as a specific requirement would often be prohibitive in terms of available resources. An examination of all controls would not be efficient (and would not always add value) because not all are significant in fact, the importance of controls is directly linked to the assessment of business risk within an auditable area under review. The auditor should exercise professional judgement and should concentrate on controls which are important within the full scope of the system under review, i.e. key controls Reporting Each audit report should: Be clear, concise and complete; Explain clearly, where applicable, the scope, objectives and limitations of the audit; Include an audit opinion; Present findings, conclusions and recommendations in order of importance (based on risks assessed) and in an objective and dispassionate manner; Include only factual information and findings and conclusions adequately supported by evidence; Reflect the balance between critical comments and recognition of management and initiated improvements; Identify and explain issues or questions needing further study and consideration by the auditor or others; Highlight any departure from policies, plans, procedures, standards, laws and regulations; and Recognise the views of management which should be considered for presentation in the final audit report Audit Management Responsibilities The responsibilities of the Director Internal Audit include the following: Page 13 of 57

14 Organising The Director Internal Audit should define and put into effect organisational arrangements appropriate to provide the quality and level of auditing services required at reasonable cost. Organising involves the establishment of the organisational structure and includes the division of work into manageable units and the specification of the span of management. It involves the use of such tools as organisation charts, position descriptions, flowcharts, procedures, records and reports to establish the flow of information and the responsibilities and authorities of individuals for performing activities, establishing information trails, and setting standards of performance Directing The Director Internal Audit should provide directives and written policies and procedures to guide Audit staff. Directing involves undertaking certain activities to provide additional assurance that plans are carried out and that systems operate as intended. These activities include issuing instructions to staff. The form and content of written policies and procedures should be appropriate to the size and structure of the Audit unit and the complexity of its work Controlling The Director Internal Audit should establish and maintain a system of supervision and control (including a quality assurance program) to evaluate the operations of the Audit unit and provide reasonable assurance that required results will be met in an efficient and economical manner. 1.3 Audit and Compliance Committee Charter The Audit and Compliance Committee Charter provides details of that Committee s membership, purpose and responsibilities. The Audit and Compliance Committee Charter may be found on the Curtin University Internal Audit website here. Page 14 of 57

15 2.0 Personnel & Administration 2.1 General Procedures 2.2 Personnel Commencement of an Audit Audits are to be commenced and conducted only at times when, at the auditor's discretion, they will cause the least inconvenience and disruption to the normal activities of the Faculty/School/Department/Area. All audits should be preceded by an initial notification of the audit's commencement and one or more entry interviews where the scope and objectives of the audit are discussed. The auditor should also consider meeting with the prime auditee of the auditable area prior to issuing the notification, if there is any possibility that problems may be experienced in obtaining management support for the audit to be undertaken. The auditor should later formulate a letter of engagement which confirms with the auditee, the matters discussed at the entry interview. Where the auditor is concerned that the auditee may be lax in providing information required to commence the audit, an Internal Audit Request (IAR) form may be used (see Section 9 Forms and Templates List) Conduct of an Audit When in the field, auditors are to arrange a suitable position in the office in which to conduct their work. Due care of University property and records is to be exercised and the confidentiality of records and security of value items is to be maintained by the auditors. Auditor working documentation and materials, and University records, are not to be carried loosely but in folders or brief cases The Auditor The auditor's role involves the critical reporting of deficiencies in the University's system of control and management of business risk. This can sometimes upset or cause dissatisfaction amongst management and staff. People in authority have the added responsibility of setting an example to others. Other University staff members expect auditors not only to know the correct procedures but to exhibit a certain level of behaviour, particularly if the auditor is in a position to be reporting on where work doesn't meet an acceptable standard. The following points may act as a guide to the level of behaviour that is expected of new Audit staff: Approach - Auditors, like their auditees, are all members of the same institution and shouldn't set themselves apart or appear to be aloof. Audit is a management tool in the overall Page 15 of 57

16 organisation of the University and its function is to assist rather than to hinder. Audit officers are to be friendly and fair in their approach but, at times, need to be firm in exercising their authority - particularly if other staff members are reluctant to give positive assistance. Work Knowledge - The whole basis of the auditor's work centres around determining weaknesses in control and management of risk. In order to be appointed to Internal Audit, officers must display a certain level of experience and competence. It is the auditor's responsibility to ensure that he/she refers, as often as is necessary, to the University's policies and procedures, individual Faculty/School/Department/Area procedures manuals, user guides and any statutes/regulations which may be applicable Internal Audit Area - Organisation Structure The Internal Audit Area is structured as follows: Security of Documentation It is most important that University records and property in the care of auditors be adequately secure at all times whether in the office or in transit. Auditors shall ensure that: Audit files, when the auditor is in the field, are suitably housed overnight and not left on desks; Personal computer equipment and backup thumb drives/cds are not left unsecured while the auditor is away from his/her desk; Page 16 of 57

17 Any University documents, files, reports or papers of any nature are not taken outside the building unless in a suitable envelope, parcel or briefcase. Audit staff who are required to take PC equipment, working papers or reports to their home prior to commencement of (or during) an audit must ensure that this property is not left in motor vehicles overnight. 2.3 Administration Audit Procedures The Internal Audit area may maintain various Acts and Statutory Regulations, as required. However, much of this information is now readily available on the web. The Internal Audit area will maintain the following internal documentation: Audit Manual (which is stored electronically on the Internal Audit Area J drive and published on the Internal Audit website). This manual determines the standard expected of auditors in discharging their audit responsibilities. This document is stored on the LAN in: J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Procedures\Internal Audit Manual\2011 Onwards CCH TeamMate System User Guide for Curtin Auditors (which is stored electronically on the Internal Audit Area J drive and published on the Internal Audit website). This guide describes how the Internal Audit Area s audit methodology is to be utilised through the use of the CCH TeamMate electronic working papers system see further information below. This document is stored on the LAN in: J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Procedures\CCHTeam Mate Manual Other technical auditor information (which is stored electronically on the LAN in the appropriate directory e.g. running CAATs). CAAT software is held on the LAN in: J:\ODVC\PQ\AUDIT\INFORMATION AND COMMUNICATION TECHNOLOGY\Compliance\CAATS Amendments to the above documentation are to be authorised by the Director Internal Audit Area Expenditure All drawings made to recoup expenses paid during the course of an Audit, for interstate travel or external training, are to be compiled personally by the auditor for authorisation by the Director Internal Audit (or relevant support administrative staff). Copies of all supporting documentation, including receipts, vouchers etc are to be filed in the relevant administration area of the Office within which the Internal Audit Area operates. Page 17 of 57

18 2.3.3 Management Reporting Each quarter, the Director Internal Audit is to submit a report to the Director's administrative supervisor (i.e. the Vice-Chancellor) outlining activities carried out by the area for the previous quarter. The information contained within this report will also form the basis for the Internal Audit quarterly update paper presented to Audit and Compliance Committee (The Director Internal Audit is required to attend Audit and Compliance Committee meetings, as required, to discuss activities performed by the Area for the previous quarterly period) Hardcopy Audit Documentation The final audit report for each audit conducted is to be retained in two official records files. One file (for the audit itself) is stored in the Internal Audit compactus; the other file is kept in the cupboard space in the office of the Director Internal Audit. Retention time for this documentation is in accordance with University recordkeeping procedures Electronic Working Papers The Internal Audit Area has moved to full use of the CCH TeamMate electronic working papers module (EWP). In this system, all programs, working papers, supporting appendices etc are stored electronically. 2.4 Time Usage Analysis Timesheets As a means of providing information for analysis of time usage, it is required that each auditor maintain records of time spent on activities during the day (see Timesheet in Section 9 Forms and Templates List). The Time Recording Sheet (a computerised spreadsheet) is to be completed each day and handed to the Director Internal Audit midway during each month and within one working day after the end of each month. Auditors are required to record time spent on each individual activity by key task/category/milestone as specified in Part A of the Field Audit Plan. The minimum unit of time to be recorded is 0.25 hours (15 minutes) in a 7.5 hour working day. In calculating administration (non-productive time), the auditor should first determine hours spent on each assigned project and other tasks during a working day; the remaining hours should then be allocated as administration to make up 7.5 hours in total. The timesheet is to be updated each day and figures accumulated on a calendar month basis, with final actuals being carried forward from the previous calendar month. Any necessary totalling of figures is performed automatically by the spreadsheet software. Page 18 of 57

19 The Director Internal Audit is to ensure that, on a monthly basis, totals are transferred from the computerised timesheets to the Audit Progress spreadsheet (which reports annual budgeted time against actual hours for scheduled audits). Page 19 of 57

20 3.0 Audit Planning 3.1 Planning Summary of Planning Process The Director Internal Audit should establish plans to discharge assigned responsibilities as laid down in the Charter. Such planning involves a systematic approach to the setting of objectives and goals, the selection of an appropriate strategy and planning approach from various alternatives, and enables measurement of the achievement of the unit's objectives. The total audit planning process involves the establishment of: A Strategic Audit Plan which is the identification and documentation of auditable areas within an Audit Universe, and the prioritisation of these areas for review based on a predetermined risk assessment methodology over a period greater than one financial year; An Annual Audit Work Plan which sets out the planning of individual audit assignments over one financial year; and A Field Audit Plan which determines the scope and parameters for each individual audit. 3.2 Strategic Audit Plan Introduction It is Internal Audit policy that a five year Strategic Audit Plan shall be maintained, in alignment with the University s five year strategic plan. The plan will be designed so that all major auditable areas of the University are considered and risk ranked before audit resources are assigned to selected tasks. The plan will be developed by the Director Internal Audit, or an auditor delegated the task (with ultimate approval by Director Internal Audit), on at least a yearly basis Purpose The Strategic Audit Plan serves the following purposes: As an Identification of Auditable Tasks. A strategic plan highlights the key activities in the organisation to be reviewed. It can thus provide assurance that no significant auditable area has been overlooked. A well-constructed and dynamic strategic plan provides tangible evidence of management commitment to audit coverage as part of the organisation's overall system of internal control. Justification of Resources. Page 20 of 57

21 A strategic plan, when accepted, can support Audit management's requests for establishing staff levels and in determining associated budgets. Management Participation. Management overview of the strategic plan will ensure that Audit's assessment of relative priorities accords with that of management. Accountability. A plan allows the comparison of work completed to work scheduled and is an important link in the accountability chain. Direction and Control. A well-structured, long-range strategic plan, with regular reports to Executive Management, is an indicator of a well-organised and administered Audit unit. Liaison. Communication of long-term plans can facilitate working arrangements with all other review activities, including external audit Developing a Strategic Audit Plan A Strategic Audit Plan is established by: Identification; Risk ranking; and Prioritisation of auditable areas (within the Audit Universe). While the Audit Charter defines the responsibilities of the Audit function in broad terms, Audit management should possess sound knowledge of the organisation's activities in order to document the auditable areas Identification of Auditable Areas The Audit Universe of auditable areas must consider all major University operations, systems and computer environments. To this end, Audit management must seek relevant information from a variety of different sources e.g. Executive management Line management Organisational strategic and operational plans Page 21 of 57

22 User Guides, Procedures Manuals, and other departmental documentation Audit staff Previous audit results The University's Risk Map (covering strategic, operational and project risks) The Audit Universe is held on the LAN in: J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Planning\20xx Operational Plan\0 Audit General Documents, where 20xx indicates the year of the current plan. Each year, the current year's Audit Universe should be used as a starting point for the new plan i.e. copy and rename last year's Universe before performing any updates Risk Ranking Having identified the total set of audit tasks within the Audit Universe, it is now necessary to individually rank and prioritise these tasks so as to ensure that Audit resources are allocated to where they are most needed. This is done by employing a suitable risk assessment methodology e.g. aligning the Audit Universe with the University's Risk Map, or using a range of weighted risk assessment factors such as Criticality, External Factors, and Management Competence. In either case, the expected outcome is a sorted and prioritised list of audits ready for input into the Annual Audit Plan. NOTE: The Strategic Audit Plan reflects the risk profile of the organisation at one specific point in time. It needs to be dynamic, as during the year: New auditable areas may be identified; Existing auditable areas may disappear; and New risks may be identified or existing risks may change in terms of their probability and/or impact. 3.3 Annual Audit Work Plan Introduction Prior to the commencement of each new financial year, the Strategic Audit Plan will be updated and an Annual Audit Work Plan developed. This plan indicates audit coverage within the constraints of available resources for a period of one financial year. The plan will be developed by the Director Internal Audit, or an auditor delegated the task (with ultimate approval by Director Internal Audit), after due consideration by the external auditors and Executive Management. Page 22 of 57

23 The final Annual Work Plan for the area is submitted to the Audit and Compliance Committee for review and approval, prior to the commencement of the new financial year Considerations for Planning Not all of the auditable areas identified and risk ranked in the Audit Universe will be covered in the Annual Audit Work Plan. The availability, skills and knowledge of available internal audit resources, the ability to outsource or co-source audits, and the scope and objectives of each audit are factors affecting the selection of any one audit in the final operational plan. With regards to scope and objectives, typical examples are: Preliminary Review - no audit testing required. New Audit - audit program development and audit testing required. Existing Audit - audit program update and audit testing required. A 7.5 hour working day will be used in determining duration of audit assignments. Consideration will have to be given to administration (non-productive) time each working day. Administration caters for personal breaks, phone calls, Christmas lunches etc. In assigning audits to staff, the Director Internal Audit shall: reserve a proportion of time to meet ad hoc management requests or undertake special investigations, and be involved in major University projects if required; make appropriate allocations of time for two or more auditors to work on the same audit; ensure auditors are adequately rotated on audits to minimise reliance on key persons and increase skills and knowledge across the team; and determine availability of working hours for each employee ONLY after first calculating total non-worked time e.g. annual leave, long service leave, personal leave, training, study leave/exams and non-productive administration time. In addition, the Director Internal Audit will strive to ensure that agreement is reached with management on the timing of selected audits (where feasible) and their scope and objectives, prior to the Annual Audit Plan being approved by the Audit and Compliance Committee. A special form has been developed to facilitate this i.e. the Audit Budgeted Hours Estimate Sheet (see Section 9 Forms and Templates List). Page 23 of 57

24 3.3.3 Planned Audits Spreadsheet As part of the development of the Annual Audit Plan, a Planned Audits spreadsheet will be set up showing the tasks allocated to each auditor and the time estimated for each task. The schedule should also indicate other (non-project) work time and miscellaneous non-worked time. The initial draft plan is stored on the LAN J drive in J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Planning\20xx Operational Plan\2 Audit Operational Plan, where 20xx indicates the year of the current plan. At the commencement of each new year, it is to be copied into the Audit Progress subdirectory J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Monitoring, and renamed to reflect the first month of the new year. At the end of each month during the financial year, actual hours worked on audits will be transferred to the Audit Progress spreadsheet enabling comparisons to be made between budgeted time and actual time spent. The spreadsheet is to be copied and renamed each month using a three character month name to distinguish each version e.g. actuals for May in the 2011 year will be recorded in 2011budmay. 3.4 Field Audit Plan General The first stage in performing any work of a professional standard is to plan the sequence of tasks to be completed. This ensures that resources are appropriately allocated to performing the tasks, within the specified budgets. It is particularly important that the auditor, in determining the scope, objectives and timing of work to be done on a planned audit takes into consideration the information that was gathered during the previous audit planning cycle for that audit via the Audit Budgeted Hours Estimate Sheet. It is Internal Audit policy that prior to performing any audit testing, Part A of the Field Audit Plan should be completed and submitted to the Director Internal Audit for approval along with the proposed: Audit Engagement Letter; Audit Program of control tests, and associated risks; List of CAATs (computer assisted audit techniques) proposed for use; and System Description of the auditable area, and any other supporting documentation. Refer to Section 9 Forms and Templates List. However, as each audit is different, the above documents may be submitted to and reviewed by the Director at different times leading up to the audit testing phase. Page 24 of 57

25 Part B of the Field Audit Plan document should also be updated with relevant information upon completion of the audit and handed to the Director Internal Audit for final sign-off. The Field Audit Plan and accompanying documents enable Audit management to ensure that work performed meets accepted standards and audit objectives, and is carried out in the most economical and effective manner. Page 25 of 57

26 4.0 Audit Methodology 4.1 The Audit Cycle Summary Introduction The process of performing an audit has several stages. These are collectively referred to as the Audit Cycle. This covers all aspects of an audit from the initial plan to final resolution of all matters raised: Planning and Administration; Review and Evaluation; Verification; Reporting; and Follow-up. A short explanation of each phase appears below. Note that these stages do not necessarily run contiguously but may overlap Planning and Administration A pre-requisite for an efficient and professional audit is an adequate plan. The amount of work involved in planning may vary considerably, depending upon whether or not the audit has been performed before. An integral part of this planning is the entry interview (where the scope and objectives of the audit are discussed), and the engagement letter (where the outcome of the entry interview, and other audit planning related matters, are confirmed with the auditee) Review and Evaluation In this phase, the system or operation is reviewed and documented, risks and associated controls are identified, and a preliminary evaluation of the adequacy of these controls performed. From here, an audit program is developed or an existing audit program modified Verification During this phase, the audit program is followed and assessments made based upon the results of further investigation and testing Reporting At the end of the Verification phase, findings are documented, together with appropriate audit recommendations, in report form for later discussion with the Auditee during the exit interview. A draft copy of the report is sent to the auditee (management) to gain final clearance on matters raised (via written management comments). Page 26 of 57

27 Upon receipt of management comments, the comments are included within the body of the report and an audit opinion determined and inserted in the Conclusion section, prior to publication. The final report is issued, and two to three days later, an Audit Client Questionnaire Form (see Section 9 Forms and Templates List) is issued requesting feedback from the Auditee on the Auditor's performance Follow-up On a six monthly basis, a follow-up report is issued by the Director Internal Audit on all outstanding matters reported during prior audits. The status of action taken on each item is noted, and items are carried forward until all action is complete. The issues reported as being outstanding at the end of the follow-up process are reported to Audit and Compliance Committee (this occurs twice a year, at the May and November meetings). 4.2 Audit Programs Introduction It is Internal Audit policy that, before detailed audit testing is undertaken, an Audit Program should be prepared (see Section 9 Forms and Templates List). The audit program is in fact the end point of the Review and Evaluation phase. Programs may cover more than one auditable area (if these areas are clearly inter-related) but must be structured so that different auditable areas can be covered separately. In circumstances where a number of auditable areas are covered in one program, the program must make provision for a summary assessment covering all included areas. Note that there are occasions where standard audit programs may be employed e.g. for Business Unit audits. The audit program is reassessed and updated during each subsequent performance of the audit. The program is thus a working document used as a guide to the auditor and subject to amendment as appropriate Structure The audit program is made up of several sections Audit Objectives and Scope This is always the first section of the audit program. It has the following components: Audit Objectives - the primary (and perhaps secondary) objective for the program as a whole. Any summary assessment of the audit will be based on the achievement of this objective. Page 27 of 57

28 Audit Scope - the scope of activities to be included or excluded Controls and Risks Sections A separate section of the audit program is established for each major control area identified for the auditable area under review. Each control section must have one or more summary control objectives and a list of audit tests to be performed in association with these objectives. In classical systems-based audit theory, these tests should be identified with both substantive and compliance testing; i.e. to test both that the system operates as described and that it operates correctly. Each audit test, for it to exist, must be associated with key controls linked to one or more extreme, high or medium risks covering the auditable area (NOTE: low risk items are not to be tested). Risks will be identified and assessed using the University s approved Risk Matrix or other relevant information. This involves consideration of: Likelihood of Risk; Consequence of Risk; and Risk Rating (based on a combination of likelihood and consequence). Upon completion of the audit testing in any one control section, the auditor will be able to conclude, based on the results of the testing performed, whether management is achieving/has achieved the stated control objectives Standard General Section Each audit program will have a standard section, at the beginning, titled "General". This section requires the auditor to do the following: List the recommendations to major findings from the previous audit in the working papers (and the most recent management response to each recommendation) and verbally verify, with the auditee, that the matters have been addressed or are being addressed. Where a particular issue will, for whatever reason, not be covered during the current audit, sufficient audit testing must be performed in this step to verify management's response; and Review all related external audit management letter issues raised in the current and previous financial year (whether cleared or outstanding), then verbally verify, with the auditee, that the matters have been addressed or are being addressed. Where a particular issue will, for whatever reason, not be covered during the current audit, sufficient audit testing must be performed in this step to verify management's response. Page 28 of 57

29 Conduct of Audit Testing It is Internal Audit policy that the audit program will be followed exactly, except as determined by the Director Internal Audit or Senior Auditor supervising the audit (where applicable). The Director Internal Audit must approve any deviation from the program, where limited time is a factor. Prior to the audit work being undertaken, the Director Internal Audit will approve the audit program, including any specified changes or exclusions to the program steps Communication with Auditee During the course of audit work, the auditor will communicate matters of significance with the auditee to minimise the possibility of "surprises" at the end of the audit. This may be done informally (e.g. s, discussions) or via formal meetings. 4.3 Working Papers - General Rationale The auditor prepares working papers for a number of different purposes: To identify and document deficiency findings, and accumulate evidence needed for determining the existence and the extent of the deficient conditions. To help perform the audit in an orderly fashion coinciding with the audit program; to document what has been done; to indicate what is still to be done and give reasons for what will be left undone. To provide support for the audit report. Well-structured working papers make it easy to transfer the material written during the audit to the pages of the final audit report. The auditor can develop discipline that moves both the working paper documentation and the audit report on the same assembly line, minimising any rephrasing and restructuring and ensuring that the points raised in the report are covered by the working papers. An experienced auditor has the structure of the final report in mind throughout the entire audit project. It helps keep the work relevant and pointed in the right direction. As a line of defence when conclusions and recommendations are challenged. Criticism, expressed or implied, is rarely taken kindly. It leads to challenges from the one criticised and such challenges must be rebutted with facts and proof. The working papers, properly developed and referenced and readily accessible, lend support to the auditor and give a feeling of security. As the basis for supervisory or peer review of the audit progress and accomplishment. Review of the audit project should be current and continual. The working papers, as evidence of work done and to be done, are much better indices of accomplishment than unsupported oral assertions (which may easily become general, distorted or superficial) and can materially Page 29 of 57

30 benefit the audit. A review of work progress is seriously diminished in value if it is based only on conversation with the auditor. As a basis for appraising the auditor's technical ability, skills and working habits. Audit proficiency is clearly mirrored in the documentation of work and support for conclusions. As background and reference data for subsequent reviews. Audit projects may be repeated or followed up. High quality working papers make the repeat audit much easier and more economical. The subsequent review may therefore build on the earlier one Structure It is Internal Audit policy that current working papers on each program will be completed and presented in three sections (one set for each performance of the audit). See Section 9 Forms and Templates List: PLANNING AND ADMINISTRATION - comprises Initial notification of audit commencement, Field Audit Plan, Audit Checklist, Engagement Letter, List of CAATs, (new) Points for Attention at Next Audit (PANA), a Reference File (including a system description), Audit Budgeted Hours Estimate Sheet and other correspondence: o o o o o o The Initial notification of audit commencement briefly informs Executive and Senior Management of the audit s commencement and the audit objective. The Field Audit Plan facilitates the planning process at the individual field audit level. The first page of this form (Part A) is completed before the field work commences, and the final page (Part B) is completed upon completion of the audit. The Audit Checklist is a detailed guideline of activities to be performed by the auditor during the course of an audit. It serves as a reminder of the tasks to be performed and their order of completion. The Engagement Letter summarises the scope and objectives of, approach to, and an estimate of time for completing, a particular audit. The List of CAATs identifies the proposed computer assisted audit techniques (e.g. sample data extracts, exception reports) that will be required to support the specified audit tests, and who will be responsible for running them. The PANA is completed during the course of the audit and outlines any points that need to be highlighted at the next audit. It provides a mechanism whereby appropriate followup action can be initiated and, for this reason, the form should be referred to before the next audit of the auditable area for which it was completed. Examples of points which may be listed for attention at next audit include selected items which could not be located for checking at the time of audit and any other matter which could not be Page 30 of 57

31 properly dealt with at the time of audit and requires or merits attention at the next audit, including program steps not performed. o o The Audit Budgeted Hours Estimate Sheet provides information obtained on the scope and objectives of the audit, during the audit planning cycle undertaken in the previous year. The Reference File contains static or permanent information in relation to the auditable area e.g. a system description, design committee minutes, executive submissions, user guide sections, flowcharts, sample forms, sample reports etc. EVALUATION AND VERIFICATION comprises the development of a set of audit tests to be performed on identified key controls that are linked to one or more extreme, high or medium risks, and the collection of sufficient and appropriate evidence in order to assess whether these controls are operating adequately and effectively: Test Workpapers are prepared while the Audit Program is being executed. The contents of this section will vary greatly from one audit to another; however, in general terms it should record the full detailed results of the audit: o o The actual test or work performed must be described in narrative/tabular form, with appropriate references (where necessary) to supporting documentation in the Appendices e.g. copies of actual forms, documents or report pages used to support findings. In addition, large tables of tests performed should also be documented and inserted here to avoid excessive detail in the main narrative. Each test completed should have, incorporated within it, statements of any conclusions reached (and the validity of these statements should be self-evident from the documented findings). o Upon completion of an audit section, the overall conclusion for the section should be determined and documented immediately after the last program step on the worksheet. This overall conclusion should be documented as a separate paragraph with its own heading "CONCLUSION" and should indicate whether the control objectives for the section have been attained. o Each audit program step documented may have one or more unique reference numbers created which link to identified Audit Issues (this is usually performed at the completion of the audit when all of the issues identified during the course of the work can be considered). o Where audit testing involves drawing conclusions based on samples, then an appropriate approved sampling methodology will be employed. o All audit documentation produced must be signed off by the auditor when it is complete, before being reviewed and signed off by the Director Internal Audit (or a delegate). Page 31 of 57

32 AUDIT REPORTING comprises Audit Issues identified, Audit Reports and associated memoranda: o During the course of the audit, Audit Issues may be identified which may eventually find their way into the draft audit report (as either major issues or minor issues). o Prior to the final report being compiled, the Auditor may develop a set of Audit Observations which will contain information on observations made during the course of the audit work, and associated evidence to support observations. These observations may not necessarily be raised as report findings, but are for discussion with auditees to ensure they are kept informed of matters arising from the audit that have potential to be reported (and to eliminate any erroneous or incorrect findings at an early stage). The observations may be progressively accumulated during the audit, but must be discussed with management before the final working papers are submitted to the Director for review. As there may be many changes arising from these matters being brought to the attention of management, it is not necessary (or even feasible) to align each matter raised in the Audit Observations sheet with those in the final draft report and working papers. o At the end of the audit, the Audit Report Grade and Conclusion will be determined at this point, the Audit Report is ready to be issued to the Executive Manager and his/her direct reports by the auditor through the Director Internal Audit (see section 4.4 below for more detail). 4.4 Audit Reports o Other memos and any extra correspondence received/raised during the course of the audit, or after final audit report issue, may also be included here Philosophy At the conclusion of every audit project, a formal report to management will be issued see Section 9 Forms and Templates List. The purpose of such a report is to give University management the auditor's assessment of the reviewed area. This assessment will include major issues and action to be taken by management to correct any problems, as well as recommendations for improvement on low risk items. Note that a major issue is defined as one whose inherent risk has been classified as either Extreme, High or Medium. It is Internal Audit policy to report in detail only deficiencies. This does not preclude a complimentary assessment, but such an assessment would be part of a more general statement rather than treated in detail. More importantly, the readers of the report must be left in no doubt as to the agreed or required action Audit Report Structure Page 32 of 57

33 The standard report structure is in three main sections: Audit Report Grade is displayed on the front page of the report by placing a tick graphic against the relevant audit grade row. Each of the four audit grades: o Satisfactory (Green) o Some Improvement Required (Amber) o Major Improvement Required (Blue) o Unsatisfactory (Red) is described in detail on the cover page of the Audit Report template. There are no hard and fast rules for determining the Audit Report Grade; however the risk rating of the audit findings reported will naturally help determine the final outcome e.g. the presence of one to two very high risks may be sufficient to grade an audit as Major Improvement Required. Immediately before the issue of the final report, the main auditees at Executive level are to be informed of the proposed grade of the audit report via . This is done by the Director Internal Audit. If the Audit Report Grade is to be Unsatisfactory, then immediately before report issue to Executive Management, an unsigned draft copy is to be provided to the Vice-Chancellor for his/her perusal. Usually, the Vice-Chancellor is permitted one week to review the draft report and provide any comments back to the Director, prior to issuing the final report. It will also be necessary to raise the audit report grade with the relevant Executive Manager first. Executive Summary provides a summary of the audit performed and includes standard sections describing the audit objective and scope (which should align with the audit objective and scope detailed in the Engagement Letter), any positive observations noted during the audit, a list of issues raised and the final audit conclusion (which provides the high level justification for the audit grade reported on the first page of the audit report). Major Audit Issues should each be inserted in a separate table, with the following information: o o o o o Major Issue No. - a unique number identifying the issue (in the heading). Description - a concise description of the issue. Cause(s) - details the cause or causes of the issue. Consequence(s) - details the consequence to the University should the underlying risk not be minimised, treated or eliminated. This links to the Risk Consequence rating below. Risk Likelihood, Risk Consequence and Risk Rating - provide a quantitative assessment of the risk arising from the reported finding. These are explained further in the appendix at Page 33 of 57

34 the back of the audit report (which is standard appendix contained in each major audit report issued). o o Audit File Ref. - one of more references to issue nos raised during the audit (in the CCH TeamMate system). Audit Recommendations - Internal Audit's recommendations to address the findings raised. o Management Action Plans - management's response to Internal Audit's recommendations. o Clearance Date - management's indication, in association with their formal response, as to when the matter will be cleared. Minor Audit Issues are identified as Low risk and should each be inserted as separate rows in a section titled MINOR ISSUES at the back of the report but before the standard appendix, with the following information: o o o o No. - a unique number identifying the issue (commencing from no. 1 onwards). Minor Issue Description - a concise description of the minor issue. Audit File Ref. - one of more references to findings located in the working papers. Recommendations - Internal Audit s recommendations to address the findings raised. Note that while these minor matters are discussed at exit interview with the auditee, no formal management comments are sought The Reporting Process Main Audit Report All audit reports must be printed in colour and sent to the Audit and Compliance Committee members by post. One copy of the report must also be produced for the Director Internal Audit and one other for the hardcopy working paper file. All other copies of audit reports should be converted to PDF form and ed (in secure form i.e. password required on OPEN) to the officers on the Distribution List of the report (which includes as a standard, the Office of the Auditor General and the Curtin University Corporate Risk area). A standard template should be used for the above purpose. Before finalisation, electronic signatures of the Director Internal Audit and the auditors concerned should be added to the report, which should then be converted to PDF format and secured with a standard password. Page 34 of 57

35 Finally, the Auditor is required to electronically transfer a copy of the final audit report to the following two LAN subdirectories: o For Audit Follow-up purposes (in MS Word form) if applicable - to: J:\ODVC\PQ\AUDIT\COMMITTEES\Reporting\Audit and Compliance Committee\Outstanding Issues Followups\Internal Audit\New IA Reports - for inclusion in Audit followup o For permanent electronic storage in the Audit Repository (in PDF form) to: J:\ODVC\PQ\AUDIT\PUBLICATION\Reporting\Internal Audit Report Repository Interim Reports During the course of an audit, matters requiring immediate attention may arise. Rather than wait for the completion of the audit, an interim report (Action Memo) stating the deficiencies, causes, risks and recommended action (if any) should be issued. The matters so raised, and their resolution, will still be reported in the final report. Special Reviews Internal Audit may be called upon to perform a special review. The report from such a review should follow a standard format, which may be modified to suit the circumstances of the review: see Section 9 Forms and Templates List. Deficiencies unrelated to Current Audit Matters unrelated to the current audit project may come to an auditor's attention. If these matters are of significance to Executive or if the auditor believes that the resulting exposure is serious, a formal report (Action Memo) should be issued. A final resolution of matters raised need not appear in the final report. Periodic Audit Management Reports The Director Internal Audit reports audit activity to the Vice-Chancellor (as the administrative head to the Director) and Audit and Compliance Committee on a quarterly basis. 4.5 Working Paper Review Introduction Working papers are to be reviewed by the nominated reviewing officer, usually the Director Internal Audit. Interim reviews of completed sections of uncompleted audits should be performed by the reviewer to allow for timely rework if necessary (rather than waiting for the entire audit to be finished). Page 35 of 57

36 The working papers file, including the draft report findings and Scope and Objectives (but not the Audit Report Grade and Conclusion), is to be handed to the reviewer prior to the exit interview. Once the review has been completed and queries resolved, all documents are to be filed on the working paper file Procedures All working papers must be reviewed to ensure that the audit has been adequately conducted and documented. The reviewer must sign each worksheet (excluding appendix documents) as evidence of review. Formal queries raised by the reviewer will be documented as Review or Coaching Notes and referred to the auditor for answers. No working papers will be considered complete until all questions have been answered to the reviewer's satisfaction. The checklist below is an indication of the aspects which the reviewer will examine before exit interview: Ensure that the audit program is fully signed off. Ensure that audit steps signed off as being "not applicable" are in fact not applicable. Ensure that the program is changed to reflect any system changes. Enquire into audit steps which have not been signed off. Ensure that the `Points for Attention at Next Audit' from the previous audit have been adequately resolved or addressed. Ensure that there is adequate cross-referencing of detail. Confirm that the Reference File has been brought up-to-date. Check that each finding in the working papers has been accurately brought forward to the report. Assess if there is sufficient supporting evidence for each matter raised. The checklist below is an indication of the aspects which the reviewer will examine after management comments have been received, inserted in the report, and the Audit Report Grade and Conclusion prepared: Ensure that each major finding reported has been properly resolved or includes a comment from relevant management. Ensure that the draft report has been discussed with the appropriate auditee(s) before the final report is released. Page 36 of 57

37 Confirm that the Report Conclusion written by the auditor properly reflects the outcomes of the audit. Check that all Review Notes have been addressed before signing them off along with the working paper file. 4.6 Flowchart Documentation Introduction In many audits, it will be useful to create flowcharts to present an overview of the function(s) in the system to be audited. If there is a flow chart in existence, then the step should be to review, update and improve the chart on hand (which should be located in the Reference File immediately after the System Description). The purpose of flowcharts is twofold: To provide a simplified picture of system/operation function; and To document the control points in a system. It is important therefore that an appropriate balance between detail and simplicity be established. A complex flowchart is difficult to understand and update; it is likely to be of little use to anyone other than its original author. The use of narrative to clarify charts is encouraged but charts are not an appropriate place for long descriptions. A flowchart is a graphic representation of relationships, of flows of information or documents. A single chart should not be made to perform all functions. 4.7 Audit Sampling General Audit sampling is a method by which an auditor can draw conclusions about the whole of a group of items (the "population") by examining some of them ("the sample") Testing Template Auditors will use the Internal Audit area's standard Audit Testing Template to determine sample sizes, based on population and risk, and to draw conclusions as to what is happening in a population of audited items. This template is now built into CCH TeamMate (EWP module) and details: Test performed; What population the sample was selected from; Page 37 of 57

38 Why the sample size was selected; Who provided the documentation to be tested; Any exceptions found; and Test conclusion. NOTE: Where the audit period selected is such that the sample size cannot be achieved, the Auditor must exercise his/her judgement in determining what to sample and in what period. It may mean that the whole population in the audit period is selected, plus other transactions outside of the period in order to achieve a reasonable sample for testing, based on the guideline in the template Sample Selection Once a sample size has been determined, each item to be sampled will be selected on the basis of the following: On a completely random basis and in such a manner that each item in the population has an equal or known chance of being selected; or On a fixed interval basis, with a random starting point. Page 38 of 57

39 5.0 Major Project Development Audits 5.1 Audit Objectives General The following guidelines provide Audit personnel with direction in respect to the audit activity to be undertaken during major project development in the University (should Internal Audit be required to participate in such work). These guidelines have been separately documented because of the unique nature of audit involvement in the project development process. These guidelines are not, however, intended to restrict any project development audit to a limited set of activities or to impose a precise solution for such an audit Audit Objectives Auditors may participate in the development of selected major new University projects (providing oral and/or written input and advice as required), with the objective of gaining assurances that business risks are identified and managed and suitable controls implemented. 5.2 Audit Approach General Auditors may be assigned to major project developments by the Director Internal Audit. The Director Internal Audit will contact representatives on these projects to advise them of Audit involvement Audit Scope In order to achieve the primary audit objective described above, the scope and degree of auditor involvement on each project will be at the discretion of the auditor. Auditor involvement will, however, be guided by way of a Standard Audit Checklist (see Section 9 Forms and Templates List) which will be made available to the auditor at the commencement of that auditor's involvement in the project. An auditor's time involvement may be limited or expanded with the prior approval of the Director Internal Audit, after consideration of existing budgeted audit time constraints Audit Deliverables Auditor involvement on major project developments will focus on adding value during the course of the project development, rather than on producing detailed audit documentation and working papers. Page 39 of 57

40 However, an audit report should always be issued upon implementation of a project (see Section 9 Forms and Templates List). The format of this report will be non-standard in that the auditor is not expected to raise new major issues and obtain management recommendations (as such matters should have been resolved during the course of the project). Instead, the report should outline the auditor's involvement, the auditor's conclusion, and list any issues that remain outstanding (but which do not materially affect the project outcomes). During the course of the audit, it may also be necessary to publish action memos where significant control deficiencies or other issues require immediate management consideration. 5.3 Major Project Development Audit Working Papers General The auditor will maintain a file of documentation arising from, or produced as a result of, audit involvement on the selected project. This documentation should be structured in accordance with the Standard Audit Checklist referred to above i.e. checklist at the front, followed by published audit report and other supporting papers. It will not be necessary for the auditor to produce written working papers as evidence that the checklist items have been addressed, however, a working paper file, as described above, should be maintained (containing memos, correspondence, documents, plans etc). 5.4 System Documentation Introduction The system documentation described below may be produced in support of major project development audits undertaken, where considered necessary. This documentation will be produced and maintained on the Internal Audit Area s LAN J drive directories. This documentation is as follows: System Description Flowcharts or Dataflow diagrams Identification of risks and controls System Description The System Description provides an overview of the system under review. The System Description outlines: Page 40 of 57

41 Input data, media and preparation or transmission locations; The major processes and files used; Output data, media and receiving locations; Interfaces with other systems; The hardware and software used; Any special or unusual features of the system; Key controls regarding processing accuracy and authorisation; and Management trails Identification of Risks and Controls The identification of risks and controls may be performed to assess the quality of controls being built into the new system. Page 41 of 57

42 6.0 Audit Evaluation and Performance 6.1 Audit Client Questionnaire Form General Two to three days after the issue of a major audit report, Internal Audit is to issue an Audit Client Questionnaire Form (see Section 9 Forms and Templates List) to one or more auditees, requesting formal comments on the auditor's performance. The form is to be electronically ed (with the details of the audit already input on the form) by the Director Internal Audit to the nominated auditees. The auditee is to formally respond to the Director Internal Audit who, upon receiving the completed form, will provide it to the auditor for his/her information and comment. The Director Internal Audit may follow up issues raised, or any negative comments made, with the auditor, and in some cases, may contact the auditee for clarification. Completed forms will be filed by the Director Internal Audit in an official records file i.e. completed forms are not to be stored with the working papers. 6.2 Performance Reviews - KRIs and KPIs General Auditor Performance Reviews are to be performed in accordance with University requirements, with a major review being performed around February each year. KRIs (Key Result Areas) and KPIs (Key Performance Indicators) are to be formulated and agreed with the Audit Team every year, but the comments received via the Audit Client Questionnaire Forms should always be included as a major KPI. Page 42 of 57

43 7.0 Miscellaneous 7.1 LAN Permanent File Naming Standards - Effective 1 May 2003 to 30 June 2012 (now replaced by CCH TeamMate) General During the course of an audit, the auditor may develop permanent documentation (flowcharts, audit programme, a system description etc) which will need to be retained and updated at the next audit. This documentation is to be stored on the LAN to ensure it is available for the auditor the next time an audit is conducted. Within the Permanent Files subdirectory are further subdirectories. Each of these subdirectories is identified by a two character alphabetic code e.g. MG (for Management and Governance) represents a subsection of the Audit Universe. Therefore, all auditable areas in the MG section of the Audit Universe will have their permanent information stored in the MG subdirectory of the Permanent Files subdirectory. Permanent files will be stored as Word, Excel etc files in subdirectories, using a standard naming format i.e. XX.YY.FCC, where: XX = the two character alphabetic code representing the appropriate section of the Audit Universe e.g. MG, US, GR etc YY = a unique two digit numeric to identify a separate auditable area within the relevant section of the Audit Universe e.g. MG.10 represents an audit called Corporate Governance and Leadership, SM.10 represents an audit called Library and Information Services etc. F = an alphabetic number that describes the file type i.e. "A" = Risks and Controls "C" = CAATs "S" = System Description "F" = Flowchart "N" = Permanent Notes "P" = Audit Programme "V" = Various other papers CC = two numeric digits, in the range 01-99, representing a unique document number. Multiple successive versions of audit programs will be identified by these two digits. Two examples illustrate the naming convention: Page 43 of 57

44 The audit programme for the audit of the Copyright Act would be stored in the LR (Legislative/Regulatory Compliance) subdirectory of Permanent Files as LR.10.P01, while the Risks and Controls would be stored as LR.10.A01 The audit programme for the audit of Expenditure Controls would be stored in the FA (Financial Activities) subdirectory of Permanent Files as FA.21.P01, while two sets of flowcharts would be stored as FA.21.F01 and FA.21.F02 Note: With the implementation of the CCH TeamMate electronic working papers system, the above arrangements will eventually be phased out. 7.2 Important LAN Directories/Files Subdirectories All Internal Audit Area LAN data is stored on J drive. Data is stored in accordance with University recordkeeping standards. The subdirectories of importance are: J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Standards\Internal Audit Administrative Files and Directories. This contains a word file with a list of all important Internal Audit subdirectories and their purpose. J:\ODVC\PQ\AUDIT\OPERATIONAL MANAGEMENT\Standards\Internal Audit Permanent Files. This contains further subdirectories of permanent documentation structured along the lines of the Audit Universe (up to 30 June 2012). Note: With the implementation of the CCH TeamMate electronic working papers system, the above arrangements in relation to storage of permanent information has been phased out. However, it remains as a repository for old audit programs and documents. Page 44 of 57

45 8.0 Other Special Audit Work 8.1 Audit Certificates General The University may be required to provide signed certificates which set out the disposition of funds provided or obligations undertaken. The most common types of certifications required relate to various grants provided by relevant federal, state and private sector bodies. The University may also be required to provide an audit certificate to an external party in relation to the financial operations of other activities in which it is engaged e.g. Curtin Radio FM Western Australian Satellite Technology Consortium Most requirements for certification are governed by contracts, procedure manuals or legislation which set out the format and frequency of certifications as well as defining exactly what is being certified. They can also define who is qualified to sign the certificate Preferred External Service Providers Where such an audit is required, it is standard procedure (from 1 March 2007) that the work should not be undertaken internally (unless there is a specific requirement for Internal Audit to provide such an audit opinion). This type of audit is not covered within the scope of work described in the Internal Audit Charter. In addition, the provision of audit certificates, particularly to external bodies, may create a legal liability for the University should the opinion offered later be found to be incorrect or deficient. The University has access to preferred external suppliers of such services who will provide a quote for the work to be done (on a fee for service basis). Information concerning these service providers is available on the Strategic Procurement website. 8.2 Special Investigations Introduction Special investigations will be conducted with the urgency and priority established at the time the investigation is requested or the circumstances determine. From time to time, the Internal Audit Area may be called upon to perform special investigations. These, unfortunately, often relate to investigating an incidence of fraud or other type of misconduct, as described under the Corruption and Crime Commission Act 2003 (WA). In such Page 45 of 57

46 cases, the Professional Standards and Conduct Unit may contact Internal Audit and request that an investigation be done in relation to an allegation of staff misconduct. However, they may also be urgent investigations of an aspect of operations which do not fit the "traditional" definitions of compliance audits (e.g. investigating the effectiveness of destruction of confidential documents) and cannot be scheduled as part of the normal audit program. In these cases, an Internal Auditor will be contacted to perform the investigation. In all cases, the Chair of the Audit Committee is to be notified and permission sought for the work to be done (as per resolution made at the Audit Committee meeting held on 14 November 2003). Page 46 of 57

47 9.0 Forms and Templates List 9.1 Introduction The following list of forms and templates outlines and displays the standard forms and templates to be used in the conduct of internal audits at Curtin University. NOTE: These forms and templates are in most cases taken direct from the CCH TeamMate system so do not match the standard forms currently used for non-teammate audits. Electronic forms and templates are primarily held in the EWP module of TeamMate but are also backed up to J drive at: J:\ODVC\PQ\AUDIT\INFORMATION AND COMMUNICATION TECHNOLOGY\Compliance\CCH TeamMate\CCH TeamMate Electronic Form Templates - BACKUP ONLY - DO NOT DELETE with the exception of the standard timesheet which is held on J drive at: J:\ODVC\PQ\AUDIT\PUBLICATION\Corporate Style\Forms and Templates\Other Internal Audit Forms General 9.2 Time Recording Timesheet Page 47 of 57

48 9.3 Section 1 - Planning and Evaluation Notification of Audit Commencement (example) Audit Checklist (two pages) Page 48 of 57

49 9.3.3 Field Audit Plan (two pages) Audit Engagement Letter (usually four to five pages) Page 49 of 57

50 9.3.5 Internal Audit Request IAR (one page) Page 50 of 57

51 9.3.6 List of CAATs (one page) PANA (one page) Page 51 of 57

52 9.3.8 Reference File System Description (up to three pages) Audit Budgeted Hours Estimate Sheet (one page) Page 52 of 57

53 9.4 Section 2 - Reporting Draft Audit Report Covering Memo (one page) Audit Observations (variable no. of pages) Page 53 of 57

54 9.4.3 Main Audit Report (variable no. of pages) Page 54 of 57

55 Page 55 of 57

56 9.4.4 Audit Client Questionnaire (one page) Page 56 of 57

57 9.4.5 Hardcopy Cover Sheet for Official Records File (one page) 9.5 Section 3 - Verification 9.6 Other General Standard templates for audit programs, working papers, appendices, audit testing, review notes are built into the CCH TeamMate system please refer to the CCH TeamMate User Guide for Curtin Auditors, for sample screens Major Project Development Checklist (available on request) Major Project Development Report (available on request) Page 57 of 57