Operational Auditing Guidelines: Enhancing People Techniques for Effective Management

1. Accounting Business Skills “The What” • Business perspective • Organizational focus • Bias for action • Communication excellence • People proficiency Operational Auditing--Fall 2006

2. Financial Management Guidelines “The How” • Cc • KTT • MBWA • R ƒ R3 Operational Auditing--Fall 2006

3. Human Relations Issues • General people techniques • Due professional care • Hostile management approaches • Dealing with external auditors • Participative approach w/auditees Operational Auditing--Fall 2006

4. General People Techniques • Promote the “wanna” • Foster feedback • Adopt a consultative approach • Use the “Will Rogers’ Approach” Operational Auditing--Fall 2006

5. …Due Professional Care • Be fair but don’t whitewash • Avoid surprises • Go for the win-win • Have the guts to go to the top Operational Auditing--Fall 2006

6. Hostile Management Approaches • Select the right time for discussion • Remain flexible in your conclusions • Avoid emotion; sometimes even logic won’t work • Don’t corner yourself or the other party • Listen to the other party • Help the other guy “to be right” Operational Auditing--Fall 2006

7. Dealing with the External Auditors • Different objectives • Different accountability • Different qualifications • Different activities Operational Auditing--Fall 2006

8. Cooperation • Economy • Efficiency • Effectiveness • Advantages for the external auditor • Increases external auditor client insight • Improves client relations • Rotates emphasis • Advantages for the internal auditor • Improves training • Source of additional work • Increases professional knowledge • Independent appraisal source • Compliance with SAS 65 and SAS 99 Operational Auditing--Fall 2006

9. SAS 65 • Defines roles • Defines function • Discusses competency & objectivity • Considers nature of the work • Discusses coordination • Guidelines for evaluation • Role of direct assistance Operational Auditing--Fall 2006

10. SAS 99 • Auditor’s responsibility to detect fraud Operational Auditing--Fall 2006

11. Typical Int. Audit Assistance • Design of control systems • Reduction of risk assessment • Reduction of substantive testing Operational Auditing--Fall 2006

12. Create a Cooperative Bridge • Coordination • Risk assessment alert • Control system disclosure • Common sampling tools • Pooled IT knowledge • Different perspective • Constant general communication Operational Auditing--Fall 2006

13. Participative Approach • Joint goals • Consultation • Joint authority • Open discussion re: findings • Open review of reports Operational Auditing--Fall 2006

14. COSO Control Objectives • Economy & efficiency of operations • Reliable financial and operational data and reports • Compliance with laws and regulations Operational Auditing--Fall 2006

15. Control Objectives • Reliability and integrity of info • Compliance • Safeguarding of assets • Economical & efficient use of assets • Organizational attainment of goals & objs. Operational Auditing--Fall 2006

16. Types of Control • Preventive • Detective • Corrective • Directive • Compensating Operational Auditing--Fall 2006

17. Methods of Control • Organizational • Operational • Personnel • Review • Facilities Operational Auditing--Fall 2006

18. Threats to Control • Management override • Open access to assets • Form over substance approach • Conflict of interest Operational Auditing--Fall 2006

19. COSO Approach to Achievement • Sound control environment • Sound risk assessment process • Sound operational control activities • Are the processes working • Sound info & communications system • Effective monitoring Operational Auditing--Fall 2006

20. Control Environment • Culture of integrity, ethics and competence • Overall mgt. philosophy • Proper authority & responsibility • Proper organization of resources • Proper training and development • Senior mgt. attention & direction Operational Auditing--Fall 2006