Elements of a Finding

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					Elements of a Finding
The Institute of Internal Auditors –
Puget Sound Chapter
Comprehensive Entry Level
Training for Auditors
October 12-14, 2004
Seattle, Washington




                                       1
Module Objective
After participating in the learning activities
related to elements of a finding, you will be
able to:

   Explain the role of findings in a report.
   Identify and define the four elements of a
    finding .
   Identify the elements of a finding in the
    rental car exercise.
                                                 2
Definition of a Finding

A finding is the result of a logical pulling
together of information (data gathering),
processing the information (data analysis),
arriving at conclusions on the basis of the sum of
the information about an organization, program,
activity, function, condition, or other matter
which was analyzed or evaluated and considered
to be of interest, concern, or of use to the client.


                                                       3
Function of a Finding

A finding allows us to understand what occurred,
how significant the occurrence was, and how we
may be able to either guarantee or protect against
its reoccurrence.




                                                     4
Importance of a Finding

Findings are the core of a report. Without
findings based upon evidence, conclusions and
recommendations are not possible. The findings
answer the audit objectives or audit questions.




                                                  5
Standards Related to Findings

 IIA Practice Advisory 2410-1:
  Communication Criteria
 GAS Reporting Standards for Financial
  Audits, Chapter 5
 GAS Reporting Standards for Performance
  Audits Chapter 8




                                            6
2410-1(7) Communication Criteria
   Engagement observations and recommendations emerge
    by a process of comparing what should be with what is.
   Whether or not there is a difference, the internal auditor
    has a foundation on which to build the report.
   When conditions meet the criteria, acknowledgment in
    the engagement communications of satisfactory
    performance may be appropriate.
   Observations and recommendations should be based on
    the following attributes: Condition, Criteria, Cause, and
    Effect.

                                                                 7
Elements of a Finding

   Criteria
   Condition
   Effect
   Cause




                        8
Standards for Criteria
IIA
   The standards, measures, or expectations used
    in making an evaluation and/or verification.
   What should be.




                                                    9
Standards for Criteria
GAO – Financial Audits
   An Audit report is improved when it provide
    information so that the report user will be able
    to determine what is the required or desired
    state or what is expected from the program or
    operation.
   The criteria are easier to understand when
    stated fairly, explicitly, and completely, and
    the source of the criteria is identified in the
    audit report.
                                                       10
Standards for Criteria
GAO – Performance Audits
   Provides information so that the report user
    will be able to determine what is the required
    or desired state or what is expected from the
    program or operation.
   The criteria are easier to understand when
    stated fairly, explicitly, and completely and
    when the source of the criteria is identified in
    the audit report.

                                                       11
Standards for Condition
IIA
   The factual evidence that the internal auditor
    found in the course of the examination.
   What does exist.




                                                     12
Standards for Condition
GAO – Financial Audits
   The audit report is improved when it provides
    evidence of what the auditors found regarding
    the actual situation.
   Reporting the scope or extent of the condition
    allows the report user to gain an accurate
    perspective.



                                                     13
Standards for Condition
GAO – Performance Audits
Condition provides evidence on what the auditors
found regarding the actual situation. Reporting
the scope or extent of the condition allows the
report user to gain an accurate perspective.




                                                   14
Standards for Cause
IIA
   The reason for the difference between the
    expected and actual conditions.
   Why the difference exists.




                                                15
Standards for Cause
GAO – Financial Audits
   The audit report is improved when it provides
    persuasive evidence on the factor or factors
    responsible for the difference between condition and
    criteria.
   In repotting the cause, auditors may consider whether
    the evidence provides a reasonable and convincing
    argument for why the stated cause is the key factor or
    factors contributing to the difference as opposed to
    other possible causes, such as poorly designed criteria
    or factors uncontrollable by program management.
   The auditors also may consider whether the identified
    cause could serve as a basis for the recommendations.
                                                              16
Standards for Cause
GAO – Performance Audits
   Cause provides persuasive evidence on the factor or
    factors responsible for the difference between
    condition and criteria.
   In reporting the cause, auditors may consider whether
    the evidence provides a reasonable and convincing
    argument for why the stated cause is the key factor or
    factors contributing to the difference as opposed to
    other possible causes such as poorly designed criteria
    or factors uncontrollable by program management.
   The auditors also may consider whether the identified
    cause could serve as a basis for the recommendations.
                                                             17
Standards for Effect
IIA
   The risk or exposure the organization and/or others
    encounter because the condition is not consistent with
    the criteria (the impact of the difference).
   In determining the degree of risk or exposure, internal
    auditors should consider the effect their engagement
    observations and recommendations may have on the
    organization’s operations and financial statements.




                                                              18
Standards for Effect
GAO – Financial Audits
   The audit report is improved when it provides
    persuasive evidence on the factor or factors responsible
    for the difference between condition and criteria.
   In reporting the cause, auditors may consider whether
    the evidence provides a reasonable an convincing
    argument for why the stated cause is the key factor or
    factors contributing to the difference as opposed to
    other possible causes, such as poorly designed criteria
    or factors uncontrollable by program management.
   The auditors also may consider whether the identified
    cause could serve as the basis for the
    recommendations.
                                                               19
Standards for Effect
GAO – Performance Audits
   Effect provides a clear, logical link to establish the
    impact of the difference between what the auditors
    found (condition) and what should be (criteria).
   Effect is easier to understand when it is stated clearly,
    concisely, and if possible, in quantifiable terms.
   The significant of the reported effect can be
    demonstrated through credible evidence.




                                                                20
Observations &
Recommendations
   (How to align criteria and condition)




                                            21

				
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