PLANNING
AND CONTROL OF THE AUDIT FUNCTION
As in every
sphere of life, planning is a vital prerequisite to a successful audit. The
Institute of Chartered Accountants of Nigeria (ICAN), in its guidelines to its
members, states that every audit assignment must be properly planned to enable
the auditor conduct the audit in a timely and efficient manner. Although the
guidelines were made for its members in Public Practice, they are very useful
for adaptation by Internal Auditors and Inspectors.
A good plan, according to the guidelines, has the following elements:
·
Understanding the Business: To be able to
conduct and effective audit, the auditor needs to gain sufficient understanding
of the business and the environment in which it operates. This appears obvious
enough, but there are still many auditors that do not understand the basic
elements of banking transactions in today’s electronic banking environment.
This calls for continuing education by the auditor.
·
Planning analysis: The plan should detail
he operation location where audit work is to be done the audit team, the
timetable and the budget for the work.
·
Identifies critical audit objectives:During
the planning stage specific issues requiring detailed attention in the course
of the audit. For the bank Inspector this would include accounts known to be
prone to the risk of fraudulent manipulations, or errors, adherence to new
management policies etc.
·
Evaluate the Control Environment:Where
internal auditors who carry out routine audit are resident in the branch being
inspected the inspector would need to determine to what extent, if any, he
could rely on the internal auditor’s work for the purpose of his inspection.
CONTROL
OF AUDIT FUNCTION
Control in
this context encompasses the monitoring, direction and supervision of the team
carrying out the audit. The quality of an audit depends on the extent to which
laid down guidelines were followed in the conduct of the audit. Since this
forum consists mainly of Bank Inspectors, we all know that the quality of an
inspection depends on how many “scoops” were made that is, how many fraud or
irregularities were uncovered. This is where there is a major divergence
between the external auditor and the inspector.
Whereas fraud detection is not the major concern of external auditors, it must
necessarily form the major objective of inspectors, since the inspectorate
division is one control tool instituted by directors in the discharge of the
legal duties imposed on them to ensure the accuracy of financial records kept
by the entities they run.
AUDITING
BANK SYSTEMS
Most bank inspections normally focus on the operations department. Although this is understandable in view ofhe fact that operations department is the most susceptible to frauds, other department such as the Credit and Marketing, the Treasury, Admin and other units should not be neglected, as much wastages an outright frauds do take place in these other departments as well.
Inspection will generally cover Balances as at a particular date, as well as Transactions within a specified time period. Balance auditing will entail a confirmation of the following:
1.
That recorded Assets and Liabilities exist (Existence)
2.
Recorded assets are owned by the Bank, and recorded
liabilities are attributable to the Bank (ownership).
3.
Completeness (i.e all assets and liabilities at a
particular date has been recorded).
4.
Classification - ensuring that expenses, income, assets
and liabilities were properly classified and that proper cut off periods were
observed.
5.
Mathematical accuracy and proper valuation. Transaction
auditing will entail confirmation that:
6.
Recorded transactions actually took place and were duly
authorized (Validity and Authorization).
7.
All transactions that took place were recorded
(completeness)
8.
Transactions which took place were recorded at the
right time (to avoid suppression, falsification etc.)
9.
All transactions were recorded at their appropriate
monetary value, accurately recorded and correctly classified in order to
perform the above tasks satisfactorily, the auditor must plan, control and
record his work. He must gather enough audit evidence to support whatever
conclusions he reaches and any assertion he makes.
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