PLANNING, PROGRAMMING AND BUDGETING SYSTEM MODELS (PPBS)

BY: MOHAMMAD WAHID ABDULLAH KHAN

SUMMARY: Planning, programming and budgeting system (PPBS) is a very important and effective way to need the some objective. I have tried to present this model for the learner/the persons who are related with the “Planning, programming and budgeting system” (PPBS) through an easy way. My goal is to make these persons to understand the value in the way of implantation of PPBS

Planning, programming and budgeting system (PPBS) applies to public services organizations such as local authorities and hospitals, these organizations will run short-term departmentally based budgeting system to control expenditure within a financial year.

The PPBS is a formal, systematic structure for making decisions on policy, strategy, and the development of forces and capabilities to accomplish anticipated missions.  The PPBS is a cyclic process containing three distinct but interrelated phases

introduction: In the 1980s and early 1990s, the PPBS model was in favor in many institutions of higher education, it is based on an intensive planning process that defines all activities within the unit and provides an analysis of the cost effectiveness of those activities.

PPBS are about how resources are going to be achieve the various objectives of the organization for example, the care of the elderly, once the objectives have been established programs are identified to meet those objectives and the cost/benefits of alternative programs are assessed.

Planning, programming and budgeting system (PPBS) is a middle type of budget between the traditional character and object budget, on the one hand, and the performance budget on the other. The major contribution of PPBS lies in the planning process, i.e- the process of making program policy decisions that lead to a specific budget and specific multi-year plans.

The preferred programs form in effect a long term plan to be pursued over a number of years; each program budget will disclose the cost of providing a service to satisfy an objective,

Broken down into time periods, it therefore informs management in a manner allowing them to make judgments about such effectiveness that would not be possible it programs were fragmented in the departmental of budget concerned.                

Planning: which produces the Defense Planning Guidance (DPG); programming: which produces approved Program Objective Memorandums (POM) for the Military Department and Defense Agencies; and budgeting:  budget is a budget in which expenditures are based primarily on programs of work and secondarily on character and object.

Conclusion: Planning, programming and budgeting system (PPBS) is a budgeting system that Makes sense in theory is very difficult to implement and manage higher education selling

A Major shortfall of the PPBS approach to budgeting methods to adequately measure outcomes, this is particularly true in higher education, where a number of factors contribute to the education of a student

PPBS in practice are both “time and labor” intensive but it does link fiscal discussion directly to the planning processes and program implementations processes of the institution. Effective PPBS systems rely on agreed upon goals and objectives for the institution and the unit and achievement of goals is directly related to funding.  

Message: The PPBS is now being modified into the PPBE, which puts more emphasis on execution, thus the E instead of the S in the acronym.

About the Author

MHOHAMMAD WAHID ABDULLAH KHAN

S/O MOHAMMAD SAADULLAH KHAN

Dhaka, Bangladesh

Mr. Mohammad Wahid Abdullah Khan is the Project director of “Max Textiles Ltd”.Mr. Wahid has been in accounting field since 1999. Prior to that he had completed over ten (10) years in various fields of Business like - Accounts, Finance, Internal & External Audit, project budgeting and project costing related positions in some of the largest group companies & the join venture companies in Bangladesh.

He consults about small- medium business owners and services professionals, business consulting service and project process. He is most experience in Financial Risk Assessment, Financial analysis, Financial Advising and Project Cost Analysis. He has published more than 100 articles & case study in different international journals. Such as Business, finance, personal finance, international finance, auditing, Risk assessment topic and performance & industrial related,

Mr. khan’s most popular articles is  “WAK” Model - The way of best solution for an organization internal audit process,( 1^st,2^nd,& 3^rd part)  “WAK” Model”- for successful financial resource , “Wahid khan”- cost analysis, Wahid theory – the key of dynamic series for successful financial consulting, Wahid techniques – the Significance and dependability manner for Performance audit(1^st,2^nd,& 3^rd part) Wahid’s Opinion - non-conformity among the performance audit and financial audit, Wahid’s view- The cogent task and the confront of financial/economic analysis in the modern business decision making , Wahid’s outlook - The Business Financial Analysis Should Be Included several required Documents with the analysis report or plan, WAHID’S JUDGMENT- difference strategic plan as opposed to an operational plan ,WAHID’S METHOD– the charismatic and fruitful guideline for financial investment decision making ,WAHID’S MEASURE - the influential and evaluated of similarity between profit & non- profit business planning

& Wahid’s philosophy- The examined & careful consideration of strategic planning against business planning, PPBS MODEL,

he has consulted with more than 25 service & product companies,  in recent years Mr. khan has been spending most of his professional time for financial consulting , Mr. Wahid is the owner of “WAM” Associates and “WAK” business solutions;

 

  source: articlesbase.com

WAHID’S OPINION - NON-CONFORMITY AMONG THE PERFORMANCE AUDIT AND FINANCIAL AUDIT

 BY:MOHAMMAD WAHID ABDULLAH KHAN

Summary: This article Wahid’s opinion I have tried to express about the non-conformity among performance audit and financial audit as angle of my view, the financial audit; disbursements, receipts, and miscellaneous financial transactions. In performance audit assessing the economy, efficiency and effectiveness in the use of human, financial and organization unit,

The auditor must work within economic limits; the opinion, to be economically useful, must be formed on selected tests rather than an attempt to verify all transactions. Because evidence is examined on a test basis only, an audit provides only reasonable assurance, rather than absolute guarantee.

Introduction:

In general, the auditing function involves “a systematic examination of accounts or programmatic activities, so as to ascertain their accuracy a means of verifying the detailed transactions underlying any item in a record, a governing body connects audit professionals to achieve an independent assessment of expenses and programmatic action to test the placement between projected objectives and real actions.

The most important scope with the professionals who achieve the work and their managerial connection to the entity being reviewed involve three primary fundamentals:

1) The external or third party role of auditors, serving between the principals who authorize legislative action and the agents who carry it out;

2) The observance to proficient values at every stage of the procedure; and

3) The organization of its center, where the auditor is bound in his or her efforts to a preliminary plan and a system for carrying the plan throughout.

Suggestion:

I would like to explanation my view on the clarification about the performance audit and financial audit significance parts. Earlier into describes the non-conformity among performance audit and financial audit I have tried to create clear all the parts of performance audit and financial audit for the reason. I think that the people who are related with accounts, finance, audit and also the business owners will understand individually overall about the performance audit and financial audit.

For sound understanding of the performance audit and financial audit tools can be mostly helpful to WAHID THEORY & WAHID TECHNIQUES, both of the articles are a famous for grateful to gain knowledge of the performance audit and financial audit, both theory of the like MODEL for performance audit and financial audit, Wahid THEORY – for financial audit, and WAHID TECHNIQUES- for performance audit, describe in details, learner can be used the above articles as a references,

What are the responsibilities of auditors?

A self-determining auditor’s objective in an audit is to obtain enough capable evidential matter to provide a logical base for forming an opinion on the financial statements. In doing so, the auditor must work within economic limits; the opinion, to be economically useful, must be shaped on selected tests rather than an effort to verify all communication. Because evidence is examined on a test base only, an audit provides only logical assurance, quite than absolute assurance, that financial statements are free of material misstatement. Thus, there is a risk that audited financial statements may contain undiscovered matter errors or irregularities. The survival of that risk is hidden in the express in the audit report, “in my opinion.”

PERFORMANCE AUDIT:

Definition of Performance audit – an activity assessing the degree of economy, efficiency and effectiveness in the use of human, financial and material resources at a level of organization unit, organization, or certain actions. This type of internal audit examines processes and systems of an audited in particular Performance audit and financial audit have much in common. These two types of audit may involve the same kind of tasks, namely the measuring and explanation of the performance of an audited. They also rely on similar data collection methods. While performance auditors have their sights on efficiency, financial auditors focus on the accuracy and correctness of accounts. However, there are some differences between performance audit and financial audit as well

Performance indicator criteria: Performance indicators must be

I. Meaningful, considering who the audit results are meant for (organization, managers, users, etc.),

II. Well-defined, ensuring that they are easy to understand and explicitly (clearly) defined in both what they measure and where the source data should come from. They must be unambiguous to make it easier to interpret changes in measured values,

III. Comparable, i.e. allowing comparisons between the present and the past, or with other organizations. In this case, standard definitions (indicators) may prove helpful, minimizing change over time; if the definitions change, performance must be re-measured both before and after change,

IV. Reliable, including statistically significant (estimates based on too small sample may be exposed to dramatic changes in value) and independent evaluation of performance measuring systems which allow verification and are sensitive to changes in performance,

Available: the indicators should be available and cost-efficient (data collection may be expensive), striking the right balance between data collection costs and the need to measure performance

Assessment criteria should be:

I. Relevant – have an obvious relation to the achievement of a given performance goal;

II. Operative – specific enough for use in evaluation in practice;

III. Consistent – the criteria applied in an audit must be consistent both with one another and with criteria applied in earlier similar performance audits, provided they are still valid.

In developing criteria, we may refer to multiple sources. Legislation, various directives and regulations (including internal regulations of the organization), and current concept documents are the basic and least controversial sources of criteria. It is also advisable to seek the opinion of independent experts, and draw on information from professional literature and relevant foreign experience.

Definition of some key terms used in performance audits:

1. Input – financial, human or material resources used to implement a public policy,

2. Objective – something an organization seeks to achieve,

3. Effect – the outcome or consequence of an implemented public policy measure on a target group and on others,

4. Output – the product achieved using allocated resources,

5. Economy – the state of achieving appropriate quality and quantity of inputs at the lowest possible price (in order to minimize operating cost, while ensuring adequate quality),

6. Efficiency – the state of minimizing inputs where outputs are fixed, or maximizing outputs where inputs are fixed (it is the relationship between inputs in goods, services or other activities and resources used to produce them),

7. Effectiveness – the degree of accomplishment of planned goals. Goals may be defined as outputs or effects (impacts), with results measured against objectives and resources spent to achieve those objectives,

Components of a performance audit would usually include:

I. Interviewing the principal stakeholders, such as political parties,

II. Reviewed relevant, temporary staff or contractors engaged for the activities.;

Benefits of Performance Auditing

Performance Auditing provides Parliament with independent information, assurance and advice about the economy, efficiency and effectiveness in the management of public revenues and expenditures. It also helps the management of the audited entities to streamline their processes and control for ensuring economy, efficiency and effectiveness in their operations. This promotes public accountability on the performance of state and state-financed activities. Upon consideration of these findings, Parliament might make a reassessment of priorities which may even involve policy changes at the highest level

Performance Auditing contributes in:

•Drawing attention to obstacles to the effective and efficient use of public resources;

•Providing Parliament and Ministries with a basis for making policy and other decisions, concerning improved effectiveness measures;

•Encouraging the public sector management to introduce processes for reporting on performance to contribute to more accountability.

The function of Performance Auditing is:

“To balance financial auditing through ascertaining how carefully public operations were undertaken - that is to say, to what scope intended results and effect have been achieved.” The goal of Performance Auditing is “to promote effectiveness in the operation of public assets based on three essentials: economy, efficiency and effectiveness


Why the need for Performance Auditing?

Performance audit is an improvement on the predictable financial and transactional audits that were being conducted by auditors worldwide. Its objective is to engage more closely with the auditee organization to found a formal process to use audit evidence to enable the public auditor to form an opinion and thereby to communicate to the auditee the scope to which that agency has utilized its resources in an economic, efficient and effective manner. In this process of expressing an opinion, the auditor will report on the degree of compliance to existing financial regulations. This necessitated the approval of Performance Auditing across many governments the world over, in order to widely address these issues. This shortcoming in the financial audit was compounded by the global trend of taxpayers and donors demanding greater accountability and transparency in the utilization of their resources. Therefore, governments became compelled to account for not only the use of these possessions as planned but to also give assurance that they were utilized in the most economic, efficient and effective manner

FINANCIAL AUDIT:

Definition of financial audit: Financial statements are to be “duly audited by a professional accountant or by two skilled persons”. There are essentially two reasons for this necessity. The first is to provide a second look at the financial information that is being accessible to the worshippers at the annual meeting. It is corroboration that information being offered exactly reflects the true financial picture of the corporation. In this sense the audit is of benefit to the parish. The second reason for an audit is to provide treasurers with assurances that their work is correctly represented in the financial statements. In this sense the audit is of benefit to the Treasurer, as an officer of the corporation.

Audit is the examination of records and reports of a company, in order to check that what is provided is relevant and accurate. That is to say, all assets and liabilities are properly recorded in the balance sheet, and, all profits and losses are properly assessed. This assessment is done through 2 methods, by assessing internal control procedures and by checking the consistency of items.

The audit work is conducted in accordance with Generally Accepted Accounting Principles (GAAP) and includes those reviews of internal controls, tests, and verification of data and other activities deemed necessary by the auditor. Typically, annual financial statements are subject to audit while interim statements are not.

the auditor finds audited transactions as being either "right" or "wrong", "legal" or "unacceptable", etc.. These assessment criteria used by the auditor to arrive at a final opinion (at the end of the audit) tend to be relatively closed and usually pre-defined, for example by legislation. Performance audit differs from financial audit in many aspects, both in theory and practice (objective, focus, academic basis, methods, criteria, valuations, final report).

The audit is not a “questioning” of the integrity of the treasurer, nor does it reflect a concern over the veracity of the financial statements. It is simply a device to provide independent opinion on the statements themselves. There are essentially three areas that the audit will focus on; disbursements, receipts, and miscellaneous financial transactions. There is also a degree to which an audit can look at the administrative operation of the community in general although that may be beyond the scope of the audit envisioned in the Canon.

Directions of financial audit:

Moving out an audit does not involve doing the treasurer*s works over again. Nor does it entail a check of every single business the treasurer has recorded. It is essential for the auditors to do checks on random samples of business. This may mean choosing certain months and doing an exhaustive check on business processed in those months. It may include a detailed check of certain types of business such as all offering deposits and copy of same. It may be that the auditors will divide the work with one doing disbursements, another doing receipts. The significant point is that no matter what form or scope the audit takes it must be more than a perfunctory effort. It must be detailed enough to be reliable and systematic enough to provide the preferred level of assurances that are understood in the set.

Importance financial audit criteria:

I. Given the nature and the amount of the transaction, was approval to initiate it given by the proper authority.
II Was the transaction entered into the financial system to commit the funds
III. Was the transaction initiated in connection with Project?
IV. Has a delegated authority declared that goods have been supplied, services have been rendered, or work has been performed, and that the price and the proposed schedule of payments are in accordance with the contract?
V. Was the invoice date-stamped when it was received by the Department?
VI. At the time of hiring, did the employee meet security, language and educational requirements, etc?
VII. Was the staffing action approved by the appropriate delegated authority? (Financial authority)


Type of financial audit:

An audit in general is a review. The audit process involves a careful examination for the purpose of verification.

01. A financial audit is a review of company financial operation. A financial audit is usually performed by a CPA firm's auditing division.

02. A tax audit is a review of tax information, for the purpose of verifying that taxes have been paid correctly and in full. Tax audits are performed by a taxing entity, including the Internal Revenue Service (IRS) for federal income taxes, state sales tax agencies, or other taxing entities.

03. Regulatory audits and investigations are performed by regulatory agencies, such as a state wage and hour or state labor department, to verify that a business is complying with state employment laws, such as those regarding minimum wages, payroll records, and payment of overtime.

Scope of financial audit:

Office of the Auditor General (OAGI) published the findings of a financial audit conducted for 4 ADB; it was subsequently removed pending further investigation by the auditors. Further work of the auditors included:

•Interviewing the complainant,

•Reassessing the initial audit findings based on the outcome of that interview and in the light of new evidence received (if any), and

•Reissuing a revised audit report.

The revised audit report published here incorporates the results of the auditor's further work. Major revisions and/or additions to initial audit findings include the following:

•There was non-compliance with respect to one of the projects wherein office space was hired, when in fact the Executing Agency was to have provided the space.

•Required approvals for changes in the scope of the projects were only obtained and granted after modified tasks were executed.

Objective of Financial audit

The primary objective of financial audit is to examine financial statements in terms of preciseness, clarity and completeness of information of the reflected actions. This will serve as a basis to give an accountable and independent opinion.. When financial audits were first introduced, their aim was to verify whether or not the financial reports of agencies give an adequate overview of their actual financial situation. For the first time this year, the Office also provides an assessment of the legality of the transactions performed by agencies. The audit objectives constitute the expected results after considering financial statements.

The objectives of the audit planning are:

• Meeting the SAI legal objectives and other audit priorities;
• Identification of the aim, objectives and expected results from the audit
• Obtaining and analyzing the audit evidence
• Identification of the requested resources, including the financial and time costs;

All Ministries are subject to annual auditing while their more important divisions, as well as constitutional institutions, are audited selectively. The agencies subject to selective evaluation are actually audited on a regular basis to guarantee that all the largest and most important agencies are supervised. In addition to the above, the correctness of other reports (e.g. on health insurance and pensions) used for providing an opinion on the consolidated annual report of the state is verified.

The Objective of the preparation of an audit plan is to develop an audit approach that ensures the collection of proper and sufficient evidence to support the audit conclusions. Although every stage of the audit is documented, we must take account of the fact that they are interrelated and planned to contribute to the overall planning objectives. The financial audit covered area represents the audited areas with the aim of meeting the audit objectives.


Objectives of financial audit include:

• Lawfulness and Regularity, operations (transactions) are performed in accordance with the laws and by-laws in place and within the envisaged budgetary limits;

• Completeness, operations (transactions) are properly recorded in account books in line with the existing legislation;

• Truthfulness of operations, operations (transactions) recorded in financial statements are done efficiently, relevant to the audited body and referring to the audit period;

• Evaluation all transactions are precisely evaluated and recorded, as well as being compliant with the existing legislation.

• Acceptance and Reporting, transactions have been classified with reference to the structure and definite reporting in line with the specialist regulatory authority directions.

Determining Materiality

“In universal terms, a matter may be judged material if information of it would be likely to influence the user of the financial statements audit report”. In the light of financial audit, the auditor’s aim is to assess the overall error rate, misstatements and whether it can by subject to a judgment as material misstatement that attracts the notice to the users of these financial statements.

Materiality can be defined as:

The auditor wants to make sure that the financial statements do not contain any errors or misstatement. Errors or irregularities of financial statements can be considered as material if the users of these statements could be affected.

1 Materiality by value, in monetary units;
2 Materiality by nature is significant by its very nature;
3 Materiality by context, although is irrelevant in terms of nature and value it brings about deviations from the accounting definitions.

Need for financial audit:

Audit has some specificity throughout the world but has some mains components. One of the main problems in audit is the conflict between the need to control a company and the business relationship. On one hand, the audit company has to check thoroughly the books, the audit work is conducted in accordance with Generally Accepted Accounting Principles (GAAP) and includes those reviews of internal controls, tests, and verification of data and other activities deemed necessary by the auditor. But on the other side, it has to keep its customer that is its source of revenue. In practical terms, this means that the audit company will try to protect itself by carrying out the minimum checks, but if it has a slight doubt,

Below discus the main three part of financial auditing necessity, if any one read this three part he/she will be able to understand how much necessity of financial auditing in an organization,

Circularization : To make sure that the amount for each bank account specified in the trial balance are right, auditors send a request to every bank of the business to get the current balance at the closing date. Banks typically mention the debts incurred by the company, current guarantees and people who have the power to transfer fund to and from the bank accounts.

Financial interests: The principle is to endorse the amount of financial interest charges and revenues. Usually, auditors perform a global test by cunning the average interest rate and the credit and debit balance during the year.

Debtors Circularization: Auditors choose a sample of the largest debtors (using statistical sampling software) and send letters to those debtors requesting that they agree or disagree the balance, with an explanation. Due to some customers being reluctant to respond to such letters, especially where elements of balances are in dispute, this testing is usually combined with a review of cash receipts after the balance sheet date - in order to provide more substantive evidence that the balance sheet debtors figure is correct.

Wahid’s Opinion – (non-conformity among the performance audit and financial audit)

Auditing is a process involving the examination of data, statements, records, operations and performance of an auditor for a stated purpose. Performance auditing goes beyond the consideration of promptness. It aims to determine to what extent the audited has discharged its financial or other responsibilities which imply assessment of the auditor’s operation in terms of the economy in acquiring resources, efficiency in using resources and effectiveness in achieving objectives.

In additional: Financial audits seek to express a sovereign opinion on the accuracy and sprite of an organization’s financial accounts. They check compliance with appropriate accounting principles. Performance audits do not observe an organization’s financial accounts. as an alternative they seek to say an opinion on how economically, efficiently or effectively an organization undertakes its functions. They intend to add worth and develop the performance of an organization

The major non-conformity in the approach, scope and objectives among financial audits and performance audits are few examples presented in the following table.

Through compare with financial audit performance audit involves, More opinion and analysis more careful exposure criteria for assessment are not pre-defined verification tends to be at best persuasive, rather than definite reports contain more discussion and reasoned argument Also in this bases thy have some non-conformity :

a) Study selection stage

b) Study design Stage

c) Consulting the audited entity

d) Team work

Financial Auditing Performance Auditing:

• Financial Audit: Uses financial data to express an opinion on financial position and compliance with existing rules and

• Performance Audit: Uses financial as well as non-financial data to assess economy, efficiency and effectiveness in

Regulations and determines whether:

• Financial Audit: :the financial statements of the auditor fairly present the financial position, reflect results of operations and cash flows or manifest changes in financial position in accordance with generally accepted accounting principles;

• Performance Audit: the auditor has complied with laws and regulations for those transactions that may have a material effect on financial statements. The management of resources and determines whether:

Objectives :

• Financial Audit: to obtain sufficient, competent evidential matter to enable the auditor to form and express an opinion on the auditor’s financial report;

• Performance Audit: to promote compliance with laws, regulations, agreements, directives, policies and procedures as necessitated by statutory and/or auditor requirements;



Financial Audit: to encourage application of generally accepted accounting principles;

Performance Audit: to establish confidence in the reliability and integrity of the financial management system and the reports generated by it.

Other objectives are:

• Financial Audit: provision of a basis for improvement of public sector management of all resources;
• Performance Audit improvement of the quality of information on the results of public sector management that is available to policy makers, legislators and the general community;

Regulations:

• Financial Audit: Aims to strengthen control environment to reduce noncompliance.
• Performance Audit: Aims to improve overall performance capability to encourage better management of Resources.

• Financial Audit: promptness and respectability are major aspects.
• Performance Audit: Economy, efficiency and effectiveness are major aspects.

Conclusion:

I want to make the all of reader student & auditors understand my imagination through the Wahid opinion. I am sure that this opinion is the perfect to understand the non-conformity among performance audit and financial audit of any companies & organization audit

When financial audits are first introduced, their aim was to verify whether or not the financial reports of agencies give a satisfactory impression of their actual financial position. For the first time this year, the Office also provides a measurement of the authenticity of the business performed by agencies. The scale of financial auditing will be additional complete to assess expenditure information, financial management, internal control systems and the correctness of data provided by management information

A good performance audits we need to correspond more effectively with the people at large. This can be done both while defining the scope of our audit as well as after completing the audit. In a recent performance audit we invited inputs from the people by inserting advertisements in newspapers. This creates awareness of the work being done by us, on the one hand, and gives us new insights in to the issues that affect the people. We have also been distributing basic, illustrated summaries of our performance audit reports to connect the thought of readers who may not find the conventional form of our exposure exciting sufficient.

About the Author:

MHOHAMMAD WAHID ABDULLAH KHAN
S/O MOHAMMAD SAADULLAH KHAN
Dhaka, Bangladesh

Mr. Mohammad Wahid Abdullah Khan is the Project director of “Max Textiles Ltd”.Mr. Wahid has been in accounting field since 1999. Prior to that he had completed over ten (10) years in various fields of Business like - Accounts, Finance, Internal & External Audit, project budgeting and project costing related positions in some of the largest group companies & the join venture companies in Bangladesh.

He consults with small- medium business owners and services professionals, business consulting service and project process. He is most experience in Financial Risk Assessment, Financial analysis, Financial Advising and Project Cost Analysis. He has published more than 150 articles & case study in different international journals. Such as Business, finance, personal finance, international finance, auditing, Risk assessment topic and performance & industrial related,

Mr. khan’s most popular articles is “WAK” Model - The way of best solution for an organization internal audit process,( 1st,2nd,& 3rd part) “WAK” Model”- for successful financial resource , “Wahid khan”- cost analysis, Wahid theory – the key of dynamic series for successful financial consulting, Wahid techniques – the Significance and dependability manner for Performance audit(1st,2nd,& 3rd part) Wahid’s Opinion - non-conformity among the performance audit and financial audit, Wahid’s view- The cogent task and the confront of financial/economic analysis in the modern business decision making , Wahid’s outlook- The Business Financial Analysis Should Be Included several required Documents with the analysis report or plan, WAHID’S JUDGMENT- difference strategic plan as opposed to an operational plan ,WAHID’S METHOD– the charismatic and fruitful guideline for financial investment decision making ,WAHID’S MEASURE - the influential and evaluated of similarity between profit & non- profit business planning & Wahid’s philosophy- The examined & careful consideration of strategic planning against business planning, PPBS MODEL,

He has consulted with more than 25 service & product companies, in recent years Mr. khan has been spending most of his professional time for financial consulting , Mr. Wahid is the owner of “WAM” Associates and “WAK” business solutions;

Source: articlesbase.com

WAK MODEL - THE WAY OF BEST SOLUTION FOR AN ORGANIZATION INTERNAL AUDIT PROCESS,

BY:MOHAMMAD WAHID ABDULLAH KHAN

Summary: “WAK” model is a internal auditing process tool by which this tools an internal auditor wishing to implement an strategic process to complete the auditing program, only these presented three stage of WAK model process are well elaborated and know, for base on this process tool an internal auditor is able to formulate and implement the auditing aim, Auditors can work in a wide variety of settings. Auditors employed by private business, corporations, and financial companies also employed by both state and government agencies.

“WAK” model approach that if you want to be an auditor. You must have excellent analytical skills and great attention to detail. You must be proficient in accounting and auditing computer software & changes in law. Auditors should also possess a high standard of professional integrity as decisions are implemented on the basis of their statements and service.

Confronted with difficult dynamics of economic environment, businesses put an increasing emphasis on finance, management. Accounting and audit becomes more important and relevant to our daily life- as a bridge. Audit, financial, & business related education / literacy is not the only permeate in people's life but also control vital business arteries and eventually; the entire economic systems which exposed to such a business world.

I feel strongly that it is necessary to prepare everyone with a set of quantitative and analytical skills what would make them geared up to face the real financial /economical problems with confidently.

As a financial consultant, I found that without any doubt “Internal auditing” is most important than ever in business today. Internal auditing function is playing a very important role to a wide range of business from local to global business organizations of manufacturing and services industries. After a long study I discovered that if it is possible to make the whole Internal Auditing process in a framework through apply in an easy way. Then both of the parties (Auditors and business organizations) could find out the errors and resolve in the process of Internal Auditing to achieve the ultimate goal of the business. 

I would like to interpretation my view on the explanation about the internal audit & auditors activities before going into the “WAK MODEL”. I have tried to make clear all the parts of internal auditing ahead of the WAK MODEL because I believe that the people who are related with accounts, finance, auditing and also the business owners will understand overall about the internal auditing. What is the necessary of Internal Auditing? And where is the use of “WAK MODEL”. This model will help the students/learners for bearing in mind as a career to become an internal auditor.  

A. Internal audit overview:

01. Summary: Internal Audit Activity and Internal Auditor in the Ethical Culture of an Organization stresses that internal auditors, like everyone else in a company, have a role to play in corporate ethics--a role that can vary by the existence of, lack of, or degree of development of the organization's ethical culture. In fact, the internal auditor's role can be shaped as well by the existence, or lack, of an individual designated the chief ethics officer, furthermore internal auditors setting out to perform an ethics audit face both their own concerns about the often-uncharted territory of such tasks as well as the concerns of their colleagues and supervisors. Those concerns, experts say, can be allayed once such an audit is fully developed. Seemingly diaphanous notions can, in fact, be quantified and examined, and issues of appropriate versus inappropriate behavior can be addressed successfully.

02. Introduction > internal audit 

These introductions describe - “the Internal Auditor’s responsibilities with respect to the internal audit function. The Internal Auditor describes audit planning and scheduling, and discusses the scope and types of internal audits generally performed at the organization as well Internal auditors verify the effectiveness of their organization's internal controls and check for mismanagement, waste, or fraud. They examine and evaluate their financial and information systems, management procedures, and internal controls to ensure that records are accurate & controls are adequate. They also review company operations, evaluating their efficiency, effectiveness, and compliance with corporate policies and government regulations,

03. Why should organization audit?

There are many sophisticated management tools available to organizations to help them undertake activities like business process re-engineering, continuous performance improvement or balance scorecards and business excellence to conduct some sort of initial assessment or audit to establish a starting position or baseline, this baseline information is then used as a reference against which improvements in performance over time can be measured,

As far as data protection is concerned the key reasons for carrying out audit activities are:

• Determines the risk appetite of the organization

• Establishes the risk management framework

• Identifies potential threats and assesses risks

• Decides on response to risks like implementation of control

• Monitors and coordinates the risk management processes and the outcomes,

• Provides assurance on the effectiveness of risk management processes

Internal audit can be the key source providing objective assurance that all the significant risks have been identified, risk management process is working effectively and efficiently, risks are being reported and controls are effective. As part of this work, the internal audit activity will provide advice, coaching and facilitation services to assist executive management in carrying out their responsibilities.

04. Who conducts an internal audit? 

Some organizations are large enough to have a designated internal audit function. However most internal audit are carried out by staff members from within the organization,

05. Definition of auditing 

“Internal auditing is 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 the effectiveness of risk management, control and governance processes.”

In different - “Independence allows internal auditors to carry out their work freely and objectively. This concept requires that internal auditors are independent of the activity they audit “Objectivity is an independent mental attitude which requires internal auditors to perform audits in such a manner that they have an honest belief in their work product and that no significant quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others”

06. What are the advantages of an internal audit?

An internal audit offers several advantages; I have presented some of important advantages:

• In directs management’s attention to the key business issues. The audit analyzes weaknesses in the system of control and become the basis for practical recommendation for improvement.

• It gives management confidence when controls are operating satisfactorily.

•It identifies opportunities for improving efficiency and effectiveness.

•It gives early notice of potential problems, so that management can take action to head them off,

    

07. Scope of Internal Audits

The internal audit function’s scope of operations is by its very nature quite expansive. The internal audit function will assist the College in fulfilling its vision, mission, strategic initiatives, and objectives, while adhering to its core values, by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of enterprise-wide risk management, internal control systems, and governance processes.

The external auditors have to express an opinion on accuracy and fairness of financial information. The scope of internal audit is much wider than statutory/external audit. It should ideally cover all the organization’s activities. They include:

•Financial audit –accuracy, completeness and fairness of financial statements

•Operational audit- effectiveness and efficiency of operations

•Safeguarding of assets

•Review of projects

•Management audit

•Fraud detection- developing fraud exposures for every audit and detecting red flags

•Review of effectiveness of internal control

•Compliance with laws, regulations, policies and procedures

•Preservation of ethical culture – monitors the ethical climate and report on red flags that may compromise ethics

•Providing advice on reducing waste or inefficiency

08. Objectives of the internal audit:

An internal audits primary object is to examine key controls

• Financial – how is money handled within the organization? For example – who authorizes payment, and what checks and balance are in place to prevent unauthorized spending and fraud    

• Administrative – are these conducive to meeting strategic objectives.

• System related – what system are in place departmentally and across the organization and how do they fit together,

The first step is to determine which of the above considerations are you priorities and set the broad audit objectives to reflect them, 

09. Role of auditors

The auditor’s opinion on the truth, fairness, accuracy etc. of the financial statement imposes a larger responsibility on the auditor, which transcends the relationship with the client. The external auditor has to maintain total independence from the client. The auditor is supposed to be a watchdog. Government, creditors, investors and the business and financial community rely on the independence, objectivity and integrity of the auditors for maintaining confidence in operations of a company.

Too continually review and update control for adequacy and ensure controls established are strictly adhered to and in line with the guiding objectives of the Centre. Directly Ensure Compliance in all departments

• Monthly checks the Cashier record and the Supervisor’s posting into the cash book and Pastel.
• Verifies and checks all supporting documents for purpose, beneficiary, value authorization and date

• Check and ensure that relevant processes are followed for stock requisition

• Ensure internal control measures are operating as laid down

• Ensure overview function of internal audit is spread all over the operation of the Centre

• Carry out Spot check on all movable assets including cash

10. Responsibilities of auditors

• Internal Auditor:

Internal Audit is a service to management. Its functions include examining and evaluating internal control and providing assurance to the management. It is a part of the organization’s system of internal control and its scope includes ALL aspects of internal control, not just financial control. The scope of internal audit is much wider than statutory/external audit as discussed in detail above. It should ideally cover all the organization’s activities.

In short approach:

• Develop, document, implement, test, and maintain a comprehensive internal audit plan and system of internal controls to help provide assurance that applicable laws, regulations, and College policies and procedures are complied with judiciously

• Examine financial transactions for accuracy and compliance with institutional policies and applicable laws and regulations

• Evaluate financial and operational procedures to assure adequate internal controls are present;

• Identify, assess, and evaluate the College’s risk areas; make appropriate recommendations for improved internal controls and accounting procedures; and research and adopt industry best practices where appropriate

• Work with the senior leadership of the College to identify key business risks, assess those risks, and establish risk management procedures and practices based on industry best practices

• External Auditor

External auditors have to express an opinion on accuracy and fairness of financial information. An external audit program encompasses a full-scope financial statement audit, an attestation of internal controls over financial reporting, or other agreed-upon external audit procedures.

 A typical report includes inter IIA, information on

• Whether they have obtained all the necessary information

• Whether the companies has kept all the requisite books of accounts

• Whether the financial statements are in conformity with books of accounts

• The financial statements present a true and fair view of the state of affairs

• Proper records for assets, inventory, loans etc. have been maintained by the company

• Adequacy of internal control procedures

• Existence of internal audit system commensurate with nature and size of business.

• Details of statutory dues and matters under litigation

Although internal and external auditors have different and clearly defined roles they do share the same broad purpose of serving the public by helping to ensure the highest standards of regularity and propriety for the use resources and in promoting efficient, effective and economic administration.

11. Types of Audits

In preparing the Annual Internal Audit Plan, the Internal Auditor shall determine the type of audit to be performed for each auditor. The following is a summary of the various types of audits which will generally be conducted:

I. Financial audit:

Financial audits are designed to validate the accuracy and completeness of records and account balances. Financial audits will utilize substantive tests, analytical reviews, and other validation procedures which may or may not include functional tests or transaction reviews.

In financial audits, significance or materiality is usually defined as a monetary value consequently, planning decisions mainly involve the intended degree of audit assurance and the extent of audit work required to provide it. The requirements will vary from one organization to another and applicable laws and regulations. Some activities common to most audits:

•Risk assessment

•Defining Materiality

•Financial statement assertions

•Financial analysis of cash flow statement

•Compliance and substantiate procedures

•Analytical procedures

Meeting these objectives involves verification of:

•Revenue

•Sales

•Bank deposits

•Bank reconciliation

•Accounts payable

•Accounts receivable

•Disbursements

•Petty cash transactions

•Loans & Advances

•Assets

II. Operational Audits

This type of audit involves a thorough review of a department’s operating procedures and internal controls. They deal with broad performance issues, focusing on whether funds and resources have been economically, efficiently and effectively managed to fulfill the mission and objectives. An operational audit includes elements of a compliance audit, a financial audit, and an information systems audit. In particular, management audits examine and report on matters related to any or all of the following:

•The adequacy of management systems, controls and practices, including those intended to control and safeguard assets, to ensure due regard to economy, efficiency and effectiveness;

•The extent to which resources have been managed with due regard to economy and efficiency; and,

•The extent to which programs, operations or activities of an entity have been effective.

III. Departmental Audits:

Departmental audits are designed to review and evaluate the activities and operations of a particular College function, activity, department, or unit under review. Departmental audits will evaluate accounting controls, ensure compliance with College policies and procedures, applicable laws and regulations, and validate the records and account balances of the auditor. Departmental audits will utilize a complete battery of audit tests and procedures, including, but not limited to, functional tests, transaction reviews, substantive tests, and analytical reviews.

IV. Operational Audits:

Operational audits are designed to evaluate procedures and controls which impact the attainment of the College’s organizational goals and objectives. Operational audits also measure compliance with College policies and procedures as well as applicable laws and regulations. During operational audits, functional tests and transaction reviews will be utilized.

V. Grant and Contract Audits:

Grant and contract audits are designed to evaluate the contracting process, compliance with the provisions of grants and contracts, and third-party contractual performance. These audits may be performed with respect to any function, activity, department, or unit of the College and shall include all types of contracts; e.g., federal and private grants and contracts, construction contracts, and professional service contracts.

VI. Fraud and Financial Irregularity Audits:

Fraud and financial irregularity audits are designed to verify the existence and magnitude of suspected fraud and financial irregularities. Fraud and financial irregularity audits may be conducted at the request of the Finance Committee of the Board of Trustees, the President, other senior members of College management; as a result of a tip from the College’s whistleblower hotline; or at the discretion of the Internal Auditor. The Internal Auditor shall utilize the highest level of discretion when undertaking a fraud or financial irregularity audit. The Internal Auditor shall promptly notify the Finance Committee of the Board of Trustees (including the Chair of the Finance Committee), the President, and any other member of senior management which may be appropriate, of any significant findings which result from a fraud or financial irregularity audit.

VII. Follow-up Audits:

Follow-up audits are designed to determine whether corrective action has been taken on previous audit recommendations. These audits are usually conducted six months after the Final Audit Report was issued and usually include only the deficiencies reported in the Final Audit Report. The follow-up audit shall include such functional or substantive tests that are necessary to verify that necessary and appropriate corrective actions have been taken

12. The Phased Audit Approach

A phased audit approach is generally used to conduct, watch, and whole internal audits in a timely and skilled manner. This approach may not be followed for certain special projects requested by the Finance Committee of the Board of Trustees and/or senior management, during fraud or financial irregularity audits, and under other special circumstances.

This phased audit approach allows the Internal Auditor to:

• Establish guidelines for completing internal audits;

• Identify the entire internal audit process, rather than emphasizing the fieldwork

Component as the extent of the internal audit process;

•Establish responsibilities and outputs for each phase of the internal audit process; and

• Provide regular communication that serves to control and document the internal audit progress.

This audit approach is the mechanism for planning, executing, and controlling the internal audit function through periodic reports and appraisals as the internal audit process progresses.

As discussed below in more detail, the phased audit approach consists of five phases:

• The planning phase;

• The organizing phase;

• The preliminary phase;

• The conducting phase; and

• The reporting phase.

Every phase of the internal audit development has definite requirements and produces specific deliverables.

(B.) “WAK” Model (The way of best solution for an organization/ project internal audit process)

B/1. Abstract:

The internal audit is an essential and now much discussed part of business, the institute of internal auditors an international association of internal auditors, offers this definition - “Internal auditing is 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 the effectiveness of risk management, control and governance processes.” to this end internal auditing furnishes staff with analyses, appraisals, and recommendations relating to these activities Internal audit is a service its functions include examining and evaluating internal control and providing assurance to the management. It is a part of the organizations system of internal control and its scope includes .all aspects of internal control. Not just financial control. The scope of internal audit is much wider than external audit. It ideally covers all the organizations activities,

Although internal and external auditors have different and clearly defined roles they do share the same broad purpose of serving the public by helping to ensure the highest standards of regularity and propriety for the use resources and in promoting efficient effective and economic administration,

That would be helpful for management for understand and realize the company present position & situation so that an internal auditor can attentive the management about house organization, The internal auditor may be contracted to perform additional tests to determine whether such policies and procedures are operating effectively within the service organization.

B/2. Executive Summary of “WAK” Model:

This “WAK” model discus the internal auditing process for the professional auditors. Internal auditor provides information that helps people in business increase their chances of making decisions that will benefit their companies. Auditing is the language of business, and like other languages, it has its own terms and rules. Understanding this language and learning to interpret it is your first step to becoming successful in your own business and in your personal financial life as well.

In your personal life you can use business information to make decisions through internal auditing. About investing in the business, applying for a loan, and evaluating potential jobs. Banks use Auditing information auditing to make decisions about granting loans. Government agencies base their regulations on Auditing information. 

Auditing information can even be useful to non-business entities with an interest in how businesses affect local, national, or foreign communities and community members. Businesses use auditing information for planning and budgeting and for making decisions about borrowing and investing.

Overall, Auditing aids businesses in the process of making better decisions. The basics of Auditing are the same regardless of the size or type of business. In this “WAK” model you will learn through the examination of a desire small business, for more complex businesses, the economic transactions become more varied and complex as does the process of reporting them to various users.

The foundation of it all, however, remains the same. This “WAK” model will give you a solid foundation you will be able to use in any business situation you encounter. Whether you own a business or do not, even if you’ve never had any experience with auditing I think this is the perfect model for you. I hoping that you will find from this “WAK” model useful in helping you to understand these auditing issues as they apply to your small business and to your personal life.

(C.) solution of Internal audit process!

The internal audit responsible for planning and implementing Individual audits, and for the overall internal audit plan. This includes defining the scope and resources required for an audit, establishing the methodology and approach, and delegating Specific responsibilities for the overall adequacy, quality, and reporting of such audit activity and the corridor to solution in actuality is

Solution = Wish > abilities > knack (WAK)

Or else

Wish > abilities > knack (WAK) = Solution

That means if you use your wishful ness from of the heart you can gain an actual ability, and apply this gain ability you can able to done your mission smoothly, also through your ability you can show your working knack, and that is the only path of internal auditing solution,

C/1.WISHFUL: I think wish means a frame or express desires concerning; to invoke in favor of, or against, any one; to attribute, or cal down, in desire; to invoke; to imprecate, Almost all human beings do have something to ask for from Almighty Some have a craving for some lawful worldly objects, some have to ask for solutions of their problems, some longing for remedy of illness and getting good health, while some have the far-sight of asking favours of the next world. Thus every one has something to ask from his/her own angle of view.

Only wish could make a man to achieve his goal, every man has his own dream and to make that happen he must be wishful, it will move to his desire for the dream bring to light,

Educational requirements may vary slightly depending on the company, the area you wish to work and your previous work experience. For most all Internal Auditor careers, the minimum educational requirement is the completion of a Bachelor's degree.

Internal auditors are expected to have a thoughtful audit plan, an excellent working relationship with management, support from the audit committee, and state-of-the-art audit tools. But unless the right people are in place, many internal audit departments won't be able to solution the audit process.

An Internal Auditor will perform various types of tasks depending on the industry and whether the hiring organization is public or private. The main role of an Internal Auditor is to verify the accuracy of all internal records, evaluate internal systems in order to detect any mismanagement, inefficiencies or fraud

Applicants who wish their work in these areas to be considered in relation to their total Practical experience must demonstrate that they are equipped to fully identify the purpose, Scope and required function of the system under review. They also need to show that they have acquired sufficient knowledge to practically test the system and its accuracy. They must demonstrate that they have the capability to recommend modifications (or alternative technical approaches) to ensure the efficiency and accuracy of the system. Provided that the experience is broad enough to meet the elements identified. The auditor performing the evaluation is concerned with the what, whom when, where, why, and how of running an efficient and effective operation.  This means that the auditor must have knowledge of the company’s operations

I think the solution is to work in the other direction. Instead of working back from a goal, work forward from promising situations. This is what most successful people actually do anyway.

Criteria examples:

•Ethics-: credibility, integrity and honesty,

•Open minded-: willing to listen, learn accept new ideas,

•Diplomatic-: polite with high manners to his colleagues – after all he is working with people and he is the representative of the top management,  

C/2. Abilities:

The auditor’s ability to select the most appropriate strategy when conducting an audit. Auditors must be free to approach a piece of work in whatever manner they consider best. As a client company grows and conducts new activities, the auditor’s approach will likely have to adapt to account for these. In addition, the auditing profession is a dynamic one, with new techniques constantly being developed and upgraded which the auditor may decide to use. The strategy/proposed methods which the auditors intend to implement cannot be inhibited in any way.

In order to be a solution your Internal Auditor process, you will need to have various sets of abilities. You will often need to work alone on projects; therefore, you must have a strong work ethic and desire to perform highly. You will also need to have very strong computer skills as well as have current knowledge of auditing and accounting software available for your organization's type of information system

Otherwise Abilities can be useful to almost the whole thing such

•what are the top 3 traits or skills every internal auditor must have to excel?

•Can you suggest any tips or insights to develop your internal auditor expertise?

•The three essential traits for an Internal Auditor are-Selling and communication skills and enthusiasm with leadership

(1) One should be able to sell one's credentials and abilities and also be able to sell the recommendations to clients or management or process owners.

(2) The Internal Auditor should also be enthusiastic to read in between lines and go beyond the necessary Internal Audit program and documents when there is a need for the same.

(3) One should have great transformational and transactional leadership skills and be able to share knowledge, develop people and work toward a better controlled, compliant and profitable business conditions so that there is protection of everyone's interest and assurance of good business practices

Internal Auditors are taught to learn and enforce the rules, for instance those governing internal controls, policies and procedures, laws and regulations. Although this work is clearly challenging, it does not usually involve creative thinking. Creativity is not a natural talent that one either has or doesn't have. Creative thinking can be taught and learned, just like sales or public speaking. Of course, some people have more natural ability than others, but that's true of almost everything in life.

Abilities can be applied to almost everything internal auditors do. For example, abilities can help in finding new ways to:

•Ability to use standard systems:

•Ability to learn new products fast.

•Ability to estimate person-hours, hence cost

•Strengthen the quality of audits.

•Improve efficiency.

•Provide value-added service to operating departments.

•Increase service to management and the audit committee.

•Enhance professional credibility.

•Improve working conditions.

Internal auditors need to have the ability to deliver a product that meets or exceeds the expectations of senior management. Internal auditors must also be able to tell their story to maintain their influence, relevance, and reliability within the organization.

Abilities assessment: 

The following skills are helping an auditor for his /her self confident & ability

1. Explorer - The Explorer searches for new ideas -- good or bad, rational or outrageous, serious or silly. Many, many ideas are needed to find innovative solutions to problems and challenges. As a famous philosopher once said, "Nothing is more dangerous than an idea when it is the only one you have."

2. Artist - The Artist takes existing ideas, provided by the Explorer, and molds or transforms them into entirely new and unique ideas.

3. Judge. - The Judge weeds out bad ideas and attempts to find workable, feasible solutions.

4. Warrior - Finally, the Warrior implements the new ideas. Armed with a game plan, persistence, and diplomacy, the Warrior leads the battle against the many forces that resist change.

Each of the four steps is required if innovation is to occur. The most successful persons excel in all four areas, or they find others who complement their weaknesses

Criteria examples:

•Observer-: owns the ability to recognize what he sees and understand without interrogating,

•Perspective-: owns the ability to evaluate situations beyond appearance and with a wide systematic,

•View of things-: has the ability to understands the organizational consequences of his evidence,

•Versatile-: owns the ability to mobilize from one situation to another without losing direction

•Persistence-: must be persistence with his objectives and to not story away,

•Decisive-: ready to make decision

       

C/3. Knack:

Every audit solution is based on sound planning and an atmosphere of constructive involvement and communication between the client and the auditor. I see quite a few audit organizations that include how their clients to the audit service process works. It also is designed to provide a resource for sharing tools and techniques for each of the distinct phases of the audit process.

Internal Audit Procedures & knack

During the internal audit process, the Internal Auditor may employ one or more audit techniques. Such techniques include, but are not limited to:

I. Observation and Inquiry

The Internal Auditor may observe the operation of any College function, activity, department, or unit. The Internal Auditor may also make reasonable inquiries of any College employee in attempting to carry out the internal audit process.

II. Analysis and Review

A principal means by which the Internal Auditor administers the College’s internal audit function is through careful analysis and critical review of both financial and operating data. In some cases this will be accomplished through the comparison of current balances with those from prior periods. Another common technique which will be utilized while performing analysis and review activities is the breakdown of individual accounts into their most refined detail so that unusual or significant items are more likely to be highlighted and thus selected for investigation. Other techniques will be used as necessary to accomplish an appropriate level of analytical review during the internal audit process.

III. Inspection

At his discretion, the Internal Auditor shall have the authority to inspect physical assets, documents, and other evidence supporting relevant data of the auditor under review. This process is usually accomplished by verification of transactions employing the following basic audit techniques:

• Vouching—this is the verification of entries by comparing them to the original documents on which they are based. This technique helps ensure the accuracy, genuineness, validity, or truth of the entries under review.

• Recompilation—this is the process of recalculating selected calculations to determine their accuracy. In applying this technique an auditor’s footings, adding machine tapes, and spreadsheets shall never be assumed to be correct.

• Retracing of Bookkeeping Procedures—this includes tracing postings from original books of entry to ledgers and vice-versa.

• Physical Examination and Count—this technique is used to substantiate the reliability of the records under examination. In applying this technique, the Internal Auditor shall: (A) identify what is being examined; (B) determine the existence of the items being examined; (C) determine the condition of the items being examined; and (D) verify the quantity of the items being examined.

IV. Confirming

The validity of items shown on College records may be established by receiving confirmation directly from a third-party in a position to verify the validity of a given item. Requests for such confirmations must be mailed by the Internal Auditor and are to be accompanied by a return envelope addressed to:

V. Scanning

This is the process of quickly but carefully scrutinizing a ledger account, document, or any other record for questionable, unusual, or improper items. Scanning will be used in the internal audit process whenever it is determined that this process has a reasonable chance of adding value.

VI. Planning

During the planning portion of the audit, the auditor notifies the client of the audit, discusses the scope and objectives of the examination in a formal meeting with organization management, gathers information on important processes, evaluates existing controls, and plans the remaining audit steps.

VII. Fieldwork

This is very critical step as it allows auditor to determine the scope and extent of audit effort. It is done in advance of detailed testing and analysis work. The auditors can familiarize themselves with the system and control structure. Typically the audit team would consider:

• The organizational structure and the responsibilities of key members.

• Manuals of policies and procedures and applicable regulations.

• Management reports and minutes of meeting.

• Walkthrough of activity

• Discussions with key personnel

The field survey is the initial contact point and might take one or two days depending on the size of the audit. The completion of field survey helps the auditor to understand key systems and processes. If the information during preliminary audit planning is imperfect, the audit team can make adjustments to planned audit scope

VIII. Announcement Letter

The client is informed of the audit through an announcement or engagement letter from the Internal Audit Director. This letter communicates the scope and objectives of the audit.

IX. Initial Meeting

During this opening conference meeting, the client describes the unit or system to be reviewed, the organization, available resources and other relevant information. The internal auditor meets with the senior officer directly responsible for the unit under review and any staff members she /he wishes to include. It is important that the client identify issues,

X. Preliminary Survey

In this phase the auditor gathers relevant information about the unit in order to obtain a general overview of operations. She/He talks with key personnel and reviews reports,

XI. Internal Control Review

The auditor will review the unit's internal control structure, a process which is usually time-consuming. In doing this, the auditor uses a variety of tools and techniques to gather and analyze information about the operation. The review of internal controls helps the auditor determine the areas of highest risk and design tests to be performed in the fieldwork section.

XII. Audit Program

Preparation of the audit program concludes the preliminary review phase. This program outlines the fieldwork necessary to achieve the audit objectives.

XIII. Transaction Testing

After completing the preliminary review, the auditor performs the procedures in the audit program. These procedures usually test the major internal controls and the accuracy and propriety of the transactions.

XIV. Advice & Informal Communications

As the fieldwork progresses, the auditor discusses any significant findings with the client. Hopefully, the client can offer insights and work with the auditor to determine the best method of resolving the finding. Usually these communications are oral.

XV. Audit Summary

Upon completion of the fieldwork, the auditor summarizes the audit findings, conclusions, and recommendations necessary for the audit report discussion draft.

XVI. Working Papers

Working papers are a vital tool of the audit profession. They are the support of the audit opinion. They connect the client’s accounting records and financials to the auditor’s opinion. They are comprehensive and serve many functions.

XVII. Audit Report

Our principal product is the final report in which we express our opinions, present the audit findings, and discuss recommendations for improvements. To facilitate communication and ensure that the recommendations presented in the final report are practical, Internal Audit discusses the rough draft with the client prior to issuing the final report.

XVIII. Discussion Draft

At the conclusion of fieldwork, the auditor drafts the report. Audit management thoroughly reviews the audit working papers and the discussion draft before it is presented to the client for comment.

XIX. Exit Conference

When audit management has approved the discussion draft, Internal Audit meets with the unit's management team to discuss the findings, recommendations, and text of the draft. At this meeting, the client comment on the draft and the group works to reach an agreement on the audit findings.

XX. Formal Draft

The auditor then prepares a formal draft, taking into account any revisions resulting from the exit conference and other discussions.

XXI. Final Report

Internal Audit prints and distributes the final report to the unit's operating management, the unit's reporting supervisor, the Vice President for Administration, the University Chief Accountant, and other appropriate members of senior management.. The approval of the Internal Audit Director is required for release of the report outside,

XII. Client Response

The client has the opportunity to respond to the audit findings prior to issuance of the final report which can be included or attached to final report. However, if the client decides to respond after we issue the report, the first page of the final report is a letter requesting the client's written response to the report recommendations.

XXIII. Client Comments

Finally, as part of Internal Audit's self-evaluation program, we ask clients to comment on Internal Audit's performance. This feedback has proven to be very beneficial to us, and we have made changes in our procedures as a result of clients' suggestions.

XXIV. Audit Follow-Up

Within approximately one year of the final report, Internal Audit will perform a follow-up review to verify the resolution of the report findings.

XXV. Follow-up Review

The client response letter is reviewed and the actions taken to resolve the audit report findings may be tested to ensure that the desired results were achieved. All unresolved findings will be discussed in the follow-up report.

XXVI. Follow-up Report

The review will conclude with a follow-up report which lists the actions taken by the client to resolve the original report findings. Unresolved findings will also appear in the follow-up report and will include a brief description of the finding, the original audit recommendation, the client response,

XXVII. Internal Audit Annual Report to the Board 

In addition to the distribution discussed earlier, the contents of the audit report, client response, and follow-up report may also communicated to the Audit Committee of the Board as part of the Internal Audit Annual Report.

XXVIII. The Process: A Collaborative Effort

As pointed out, during each stage in the audit process--preliminary review, field work, audit reports, and follow-up--clients have the opportunity to participate. There is no doubt that the process works best when client management and Internal Audit have a solid working relationship based on clear and continuing communication.

As a result, client can help evaluate the feasibility of making further changes or modifications in your operations.

Criteria examples

• Ensures that all incomes are properly computed and received as at when due

• Ensures that all payments are disbursed appropriately in accordance with laid down accounting procedures.

• Ensures that laid down limits of authority are consistent applied.

• Ensures that all deductions are accounted for as at when due

• Ensures that the Centre complies with all statutory and international regulations governing Non Governmental Organizations.

• Regularly seek improvements on the accounting process

• Ensure that all identified errors and/ or weakness are corrected without delay.

• Ensure that all stores items are received into the store after due ascertainment.

• Ensure that all stores cards are posted regularly and up to date

Solution: If an internal auditor follow the ”WAK” Model way and he/ she can always worked smoothly and achieve the solution of audit program  

Original auditors have a huge advantage over those who lack this expertise. Internal auditing departments should train auditors to be inspired and promote a culture where vision additions. On an individual basis, auditors can differentiate themselves by proposing new and innovative approaches to many aspects of their tasks

Auditors should be passionate, even obsessed, about planning. Unfortunately, most auditors do not naturally possess this enthusiasm, so adequate time needs to be budgeted for planning, and performance evaluations or incentive programs should reward those who devote time to planning, especially when time is limited. Internal auditors are expected to have a thoughtful audit plan, an excellent working relationship with management, support from the audit committee, and state-of-the-art audit tools. But unless the right people are in place, many internal audit departments won't be able to solution

Conclusion: The internal auditor’s are provide a variety of examine of an organizations, but their  role of an organization is most major service contract with an self-determining auditing to Express an opinion on the adequacy of policies and procedures within the service Organization that may affect the internal control environment at the client organization

The Board appreciated the role of the Internal Auditor when auditing is a technique used by fulfills the organization to evaluate its effectiveness, efficiency, and nature of its operations and report to appropriate Persons the results of the evaluation along with recommendations for improvement. The objectives are to assure management that its goals are being carried out and whether or not they are able of being improved,

“WAK “ model is this process that express to whole internal auditing that is based on sound planning and an atmosphere of constructive involvement and communication between the client and the auditor. How the audit process works. It also is designed to provide a resource for sharing tools and techniques for each of the distinct phases of the audit process.

About author:

Mr. Mohammad Wahid Abdullah Khan is the Project director of MAX Textiles Ltd., Mr. WAK has been in accounting field since 1999. Prior to that he had completed over ten (10) years in various fields of Business like - Accounts, Finance, Internal & External Audit, project budgeting and project costing related positions in some of the largest group companies & the join venture companies in Bangladesh.

He consults with small- medium business owners and services professionals, business consulting service and project process. He is most experience in Financial Risk Assessment, Financial analysis, Financial Advising and Project Cost Analysis. Mr. WAK also author of another “WAK” model for successful financial consulting: & PPBS model, Mr. WAK is the owner of WAM Associates and “WAK” business solutions;

source & published : articlesbase.com