1

Auditing: A critical Tool for the Control in the University

Presentation at 3 Day WorkshopFebruary 19, 2013

09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 2

Summary of Audit Policy• Mission, Vision, objective • Authority & Responsibility• Independence / Confidentiality • Standards & Code of Ethics• Responsibility for detecting fraud (Investigation)• Scope of Internal Audit function• Other services provided by Internal Audit• Audit Process (gathering evidence, entry / exit

conference) • Reporting • Relationship with External Auditors09/01/2013

3

Introduction • Internal Auditing is an activity; and it is either– An Assurance Activity or – A Consulting Activity Designed to add value to the operations of the organisation

• It is suppose to Manage risk (risk defined) in an organisation through – Risk Identification– Risk Evaluation– Control / develop response to the Risk

• Internal Audit ends at report and recommendation

09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 4

Mission & Vision• The mission of the Internal Audit Department is to provide

independent and objective reviews and assessments of– business activities, – operations, – financial systems and – Internal controls of KNUST.

• The reviews are to ensure that University resources are used efficiently and effectively

• All resources are to be used to achieve the Goal of the University

• Therefore Internal Audit help the University achieve its goals.

09/01/2013

Prepared by Dan Bart - Plange 5

Authority & Responsibility• The Internal Audit function derive its authority

from the Statute of the University and the Internal Audit Agency Act, 2003; Act 658

• Section 17 of the statute mandates the Internal Auditor to – Ensure that Internal Auditing system of the University is

Efficient & Effective– Carry out periodic internal audit of the University in

conformity with standards & the Law– Recommendations should be implemented by Finance

Committee 09/01/2013

6

Independence & Confidentiality 1. Independence

In the context of External auditing - having no business relationship or interest in the company you audit

• Independence in the context of Internal Audit (refer to Std) is having a reporting line which enables you to review all job areas – satisfied

2. Confidentiality :• All information obtained during an audit is deemed

confidential unless otherwise instructed. Staff are not supposed to disclose audit information to anybody.

• Audit Reports are highly confidential 09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 7

Standards & Code of Ethics• We use International Standards for the Professional

Practice of Internal Auditing– Planning – Gathering evidence– Documentation of work– Reporting

• We have not developed any Code of Ethics for ourselves except that Audit staff should: – Have Integrity– Be Objectivity– Be Professional on the job– Be discreet about information 09/01/2013

Prepared by Dan Bart - Plange 8

Responsibility for Detecting Fraud• When it comes to fraud it is a shared responsibility• The management of the University is

responsible for establishing and maintaining controls to discourage perpetuation of fraud.

• Internal Audit is responsible for examining and evaluating the adequacy and effectiveness of those controls.

• Audit programmes are developed in such a way that when there are serious fraud, the audit should be able to identify it

09/01/2013

Prepared by Dan Bart - Plange 9

Scope of Internal Audit

• Statute 47 assign the following responsibilities to QAPU (in part)

• Coordinate the activities of the University’s Colleges, faculties & Departments regarding:– Strategic plan preparation, implementation &

monitoring and evaluation – Academic and Service excellence in respect to

teaching, research, administration and other services• Everything shall be done in consultation with the

Provost, Deans and Heads of Departments09/01/2013

Prepared by Dan Bart - Plange 10

Scope of Internal Audit• The rest (non - academic activities) are for Internal Audit– Governance & Organizational Management

(Policies)– Assets management (including use of KNUST

vehicles)– Budget preparation and monitoring– Revenue management– Cash management– Payments procedures – Procurement / stores procedures – Financial reporting 09/01/2013

Prepared by Dan Bart - Plange 11

Scope of Internal Audit• Implementation of policies from Management (A

critical Tool For Control In the University)– Supporting document for payments– Authority level for payment– Permission for Travelling– Assets register– Retiring of special advance– Preparing of budget– Packing of vehicles after 5 pm– Banking of income– Etc.

09/01/2013

12

Scope of Internal Audit• Over the years, the scope of Audit in the

University has been skewed towards; the following : – reviewing of P.V, (Pre – Audit)– Verifying items purchased (Verification)– Reviewing cash book– Special assignments / investigation

• This reviews, even though still relevant, the procedure has to be improved to address the changing circumstances of the University; bear with us.

09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 13

Scope of Internal Audit • The following have started on a pilot basis:– New approaches to verification of items where we

visit the departments and confirm the receipt of the goods, the quality and delivery period etc.

– Revenue Reviews – where we will give assurance to Provost, Deans / HODs on the component of your revenue, the part transferred to investments, other transferred made, etc

• We will need your cooperation in the area of supply of information and implementing acceptable recommendations

09/01/2013

14

Scope of Internal Audit• A lot of Internal Audit departments in Government

Agencies devoted all their efforts on cash / assets loss in the past

• This has created some misconception about Internal Audit in organizations till date– Audit is only Monetary – Every Audit job is equated to investigation – Audit should uncover fraud– Audit should arrest and dismiss culprit – Audit report should always have something to do with cash loss– etc.

• This has to change and see Audit as partners for development

09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 15

Scope of Internal Audit• Cash / asset loss is still relevant but what is

killing government organisation these days is inefficiency

• There is the need to tackle inefficiency, waste of resources and cash / assets loss together

• Some perceptions– Compare the finances with Elephant – Compare inefficiencies with the movement of a ship– Being paid extra for your normal job

09/01/2013

16

Other Services Provided by Internal Audit

• In the definition of Internal Audit, Consulting Activity is part of the functions; here Audit is to suggest new and improved ways to add value to the organisation. In the University: – Assets disposal– Use of ICT to improve efficiency – Accounting for Power & water distribution– Obtaining value for money from suppliers of goods

and services– Effective use of available facilities– etc09/01/2013 Prepared by Dan Bart - Plange

Prepared by Dan Bart - Plange 17

Other Services Provided by Internal Audit

• Give Professional Accounting advice to all income generating units on– How to increase profitability– Investment appraisal issues– Preparation of budgets at departments / units– Variance analysis report – Stocks controls– Etc

Everything on my slide portray what Audit can do, the next time we meet it should be what we are doing

09/01/2013

Prepared by Dan Bart - Plange 18

Audit ProcessThe following are the broad guidelines in

audit process• Planning• Gathering evidence• Documentation of work• Entry / Exit conferences• Reporting

09/01/2013

Prepared by Dan Bart - Plange 19

Reporting & Follow - Up Audit Reports should be:• Timely• Concise and Constructive • Discussed with the audit client and have their inputs • Addressed to the Chief Executive and Council sub

committee on FinanceFollow – up should be done on previous audit

recommendations Control environment is very critical for internal audit to

thrive in organisations (implementation of recommendations)

09/01/2013

Prepared by Dan Bart - Plange 20

Conclusion • Define "… an independent, objective,

assurance and consulting activity designed to add value and improve an organization's operations.

• It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes.”

09/01/2013

Prepared by Dan Bart - Plange 21

Q&A Thank You

09/01/2013