Internal audit has become a necessity and an integral part of all types of organizations. Internal audit tasks include wider dimensions than those included in external audit, as it includes studying the competence of management, verifying the validity of administrative policies, comprehensiveness of internal control applied in the company, and the employees’ compliance with systems and controls, in addition to auditing samples of the company’s transactions and activities. Crowe Dr. Abdul-Aziz Hegazy and Co –allocates a specialized working team to supervise the work of internal audit departments in companies and organizations which require the existence of such departments for supporting top management in monitoring the performance of the organization’s activities, implementing its policies, and achieving its objectives .
The following includes the general framework of internal auditing services offered by Crowe Dr. Abd El-Aziz Hegazy and Co- to its clients :
- Participating in the process of discovering the problems which top management might not have the time to deal with, in addition to offering the necessary recommendations for solving and treating these problems .
- Assisting management in identifying new point of views, and discovering better ways and methods for performing tasks .
- Guiding managerial decisions taken according to the results of the audit and the suggestions and recommendations included in the internal audit reports .
- Participating in the supervision and coordination between different departments, discovering problems which are not easily discovered using traditional auditing methods, and working on improving control procedures and communications .
- Ensuring that the organization is well managed and that management is always working on improving performance in a way that increases efficiency and effectiveness .
Elements and dimensions of internal audit:
- Evaluating internal control systems: studying and discovering internal control deficiencies and determining significant points of weaknesses, in addition to suggesting ways, methods, and solutions necessary for solving them according to the company’s objectives .
- Reviewing compliance: which means determining whether actual performance is in compliance with the established internal control methods and procedures, in addition to reviewing its compliance with the applicable laws and rules and the surrounding control environment .
- Reviewing efficiency and effectiveness: which means determining whether the available resources have been optimized and evaluating the quality of using these resources by studying the relationship between results or outputs and the required results. This is achieved by highlighting aspects of wasting the company’s resources in the internal auditor’s report .
- The previous items could be summarized using the following diagram .
1.3 Scope of work and objectives:
- Ensuring that the organization’s departments comply with achieving all the objectives, policies, and procedures approved by top management in its yearly plans.
- Ensuring the appropriateness of those policies and procedures and whether they have achieved the established goals according to the decisions of top management
- Presenting the necessary suggestions for improving and developing the effectiveness of those policies and procedures and increasing internal control on the company’s activities, transactions, and assets.
- Ensuring the efficiency and effectiveness of internal control procedures related to the following elements:
- safeguarding the company’s assets
- paying liabilities at maturity dates
- accuracy of data recorded in accounting records and the level of dependency and the accuracy of reports
- Efficiency of managing and safeguarding the company’s funds and investing any surpluses.
- Compliance with policies and decisions issued by the company’s management related to the departments’ activities.
- Ensuring that the assigned tasks are well performed by departments in addition to offering the necessary suggestions for increasing efficiency and effectiveness
- Ensuring the application of systems, policies, procedures, and documentary flow charts regulating work in financial and managerial activities and the effect of applying those policies and procedures in achieving the established objectives.
- Ensuring the application of systems, policies, and procedures related to personnel affairs in the field of recruitment, and disbursement of remunerations and benefits as well as verifying the validity of establishing and saving their files according to appropriate procedures
- Ensuring the application of documentary flow charts as well as the rules and procedures related to safeguarding fixed assets and verifying its existence.
- Ensuring the application of policies, rules, and procedures related to purchases and contracts made between the company and its suppliers.
- Evaluating policies, rules, procedures, and documentary flow charts related to disbursements and expenses and the validity of recording in financial and accounting records
- Ensuring compliance with the rules and procedures related to preparing financial and administrative reports.
- Participating in periodical and annual physical counting of fixed assets and cash treasuries in addition to performing sudden physical counting according to the auditing plans and programs
- Coordinating with the external auditor when performing audit programs to avoid work repetition and increase the effectiveness of supervision on the company’s work.
- Ensuring that the financial supervision is effectively performed and whether the accounting verifications are correctly performed on specified dates and supported with official documents and effectively reviewed by competent bodies, in cases where variances exist, they are reconciled and treated appropriately.
- Studying the managerial system of the company and the way it reacts with the financial and accounting systems and offering our recommendations in this matter.
- Participating in studying the auditors’ reports in addition to monitoring the implementation of the matters mentioned in those reports.
- Ensuring the application of the approved manuals of the company on all activities covered by these manuals as follows:
- Administrative manual and personnel affairs
- Purchases and contracts manual
- Sales manual
- Warehouses manual
- Financial manual
- Ensuring the implementation of the company’s long-term contracts whether these contracts are related to managing or operating affiliated units (ex: hotels) or contracts related to one of the company’s main activities.
- Verifying the validity of posting the company’s transactions and the compliance of the accounting treatments with the Egyptian Accounting Standards in this matter
- Participating in the process of reviewing the reconciliations sent by the company on a periodical basis to debtors and creditors and monitoring the results of these reconciliations.
- Ensuring the company’s compliance with the government laws, regulations, and decisions governing the company’s activities in the Arab Republic of Egypt in addition to offering suggestions related to treating deficiencies.
The responsibility of the company’s management:
Maintaining a good financial and managerial system which could be depended upon when performing the periodical auditing process, and verifying the validity of financial statements elements, provided that the system includes the follwing:
- An organizational flow chart explaining top management, supervisory, and executive levels in addition to appointing personnel in the organizational units stated in the mentioned chart.
- A written job description for employees in different management levels (top – supervisory – executive) identifying the scientific qualifications and work experience of each individual, in addition to identifying the duties and responsibilities and segregation of duties especially those related to recording in books and records, as well as approval authorities and saving the company’s documents.
- Documentary flow charts describing the units activities within the company especially those related to financial aspects (cash disbursement- issuing cheques….etc) as well as identifying the procedures which should be followed in recording in books and records to achieve effective internal control, in addition to determining the number of documents copies and flowing procedures in a manner which ensures effective internal control.
- Chart of accounts describing all the elements and items of the financial statements in addition to the accounts involving possible future transactions, taking into consideration the importance of not using any accounts in books and automated accounting system without being added to this chart to achieve continuing control on transactions recorded in the books and computerized system.
- Comprehensive set of books (manual or computerized) which help in obtaining analysis, data, and transactions in a timely and appropriate manner, a matter which helps in preparing the financial statements on specified dates, in addition to subsidiary ledgers which monitor the recording process in the main books.
- Written manuals (financial – purchases – warehouses - personnel…..etc) organizing work in different departments achieving internal control, and flow of documents, data, and information, provided that they reflect efficient procedures performed by the company such as sales and purchases accompanied by supply and disbursement from warehouses and treasuries.
- Providing the appropriate personnel for keeping proper accounting records (manual or computerized) which help in preparing financial statements which reflect a fair and true presentation of the company’s financial position at the date of preparing closing accounts, the company is also responsible for providing all documents, accounting books, and records (manual and computerized) upon request.
- Maintaining an effective internal control system which detects fraudulent accounts and financial statements as a result of fraud. We will plan our audit so that we could have reasonable expectations of such fraud (if any), taking into consideration that in spite of conducting our audit, the company could not depend on our tests in detecting fraud which might exist in books and records due to conducting the audit using the sampling method.
- The management of the company is responsible for providing us with copies of documents, financial and non-financial statements of the company during the financial period under audit in order to help us perform our duties as the company’s internal auditors.
Internal audit reports:
These reports include all the remarks made during performing the internal audit tasks during all its phases. Those reports usually include the following items:
1. Remarks related to internal control:
- Organization
- Segregation of duties and responsibilities
- The completion of the documentary system and records of the company
- The completion of the procedural system used in recording the company’s activities
- Supervision and reports preparation
- Safeguarding assets and documents
2. Remarks related to periodical audit:
- Authorization compliance
- Documentary audit
- Arithmetical audit
- Auditing the validity of recording and posting to accounting books and records
3. Remarks related to verifying financial statements elements:
- Whether auditors have obtained all the data and information necessary for achieving audit purposes.
- Financial statements have been prepared according to acceptable accounting principals.
- Financial statements have been affected by the principal uncertainty circumstances “going concern assumptions”
- Financial statements represent fairly the company’s financial position and result of operations, cash flow.
|
.gif){kind=small}
