What were the objective(s) of the:

a). Management?

b). Auditors?

c). Are these objectives sufficient to address the need(s) of the company for an operations audit?

d). What will be the next steps/recommendations for both the management and you as the Internal Auditor?

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AN AUDIT APPROACH WHICH PLACES MANAGEMENT'S OBJECTIVES AT ITS CENTRE The group internal audit department of a domestic products multinational company headquartered in London is undertaking an audit engagement of the multinational's operating unit in Tokyo. At an early point in the planning process of this engagement, the audit team establishes who has oversight responsibility for the Tokyo operating unit. Let us say that this is the production director located in London, to whom the head of the Tokyo operating unit reports. In a real sense the audit engagement is being conducted for the production director. The production director has a number of direct reports spread across the world, with oversight responsibility for each. The production director needs to know that all is in order within each of these operating units. He or she can go and find out for himself or herself. But the production director will rarely find the time to do so, and would hardly know how to set about doing so effectively. Internal auditing has been defined as doing what management would do if management had the time and knew how to do it. Internal auditors are experts at auditing-which management usually is not. An internal audit function does, of course, have the time to audit. Internal audit looks round corners that management are unable easily to look round for themselves. At a later stage, the emerging audit findings will be discussed with the head of the Tokyo operating unit, whose responses will be built into the final audit report; the audit report will be addressed to the production director in London who may be regarded as the main client of this particular audit engagement. The report will be copied to the head of the Tokyo operating unit. In this way, the audit findings will be addressed to the level of management that needs to know and that is capable of ensuring appropriate action on audit findings is taken. Should the production director fail to ensure this, the chief audit executive will then need to consider whether the audit results, together with reference to the CAE's view that insufficient action has been taken upon them, should be communicated to an even higher level.7 However, the CAE may consider that the degree of importance of the audit findings, when matched to the seniority of the production director, means that escalation above the level of the production director is not warranted as it may be legitimate for the production director to decide whether to live with a level of risk identified during the audit engagement. Meanwhile, early during the planning of the audit engagement, having established that the production director has oversight responsibility for the Tokyo operating unit, the audit team arrange to meet with the production director. Initially the auditors ask the production director to explain: "What are your objectives for the Tokyo operation?" As with all information offered to the audit team during the course of the audit engagement, the auditors will consider how they can independently verify the validity of the statement of management's objectives that the team has been given. If the production director points out to the audit team that he or she has not thought much about the Tokyo operation for a while and cannot immediately recall whether there are any established objectives for Tokyo, then audit findings are already starting to emerge as clearly this is unsatisfactory. Nevertheless, the audit engagement cannot AN AUDIT APPROACH WHICH PLACES MANAGEMENT'S OBJECTIVES AT ITS CENTRE The group internal audit department of a domestic products multinational company headquartered in London is undertaking an audit engagement of the multinational's operating unit in Tokyo. At an early point in the planning process of this engagement, the audit team establishes who has oversight responsibility for the Tokyo operating unit. Let us say that this is the production director located in London, to whom the head of the Tokyo operating unit reports. In a real sense the audit engagement is being conducted for the production director. The production director has a number of direct reports spread across the world, with oversight responsibility for each. The production director needs to know that all is in order within each of these operating units. He or she can go and find out for himself or herself. But the production director will rarely find the time to do so, and would hardly know how to set about doing so effectively. Internal auditing has been defined as doing what management would do if management had the time and knew how to do it. Internal auditors are experts at auditing-which management usually is not. An internal audit function does, of course, have the time to audit. Internal audit looks round corners that management are unable easily to look round for themselves. At a later stage, the emerging audit findings will be discussed with the head of the Tokyo operating unit, whose responses will be built into the final audit report; the audit report will be addressed to the production director in London who may be regarded as the main client of this particular audit engagement. The report will be copied to the head of the Tokyo operating unit. In this way, the audit findings will be addressed to the level of management that needs to know and that is capable of ensuring appropriate action on audit findings is taken. Should the production director fail to ensure this, the chief audit executive will then need to consider whether the audit results, together with reference to the CAE's view that insufficient action has been taken upon them, should be communicated to an even higher level.7 However, the CAE may consider that the degree of importance of the audit findings, when matched to the seniority of the production director, means that escalation above the level of the production director is not warranted as it may be legitimate for the production director to decide whether to live with a level of risk identified during the audit engagement. Meanwhile, early during the planning of the audit engagement, having established that the production director has oversight responsibility for the Tokyo operating unit, the audit team arrange to meet with the production director. Initially the auditors ask the production director to explain: "What are your objectives for the Tokyo operation?" As with all information offered to the audit team during the course of the audit engagement, the auditors will consider how they can independently verify the validity of the statement of management's objectives that the team has been given. If the production director points out to the audit team that he or she has not thought much about the Tokyo operation for a while and cannot immediately recall whether there are any established objectives for Tokyo, then audit findings are already starting to emerge as clearly this is unsatisfactory. Nevertheless, the audit engagement cannot

Answer rating: 100% (QA)

Objectives of Internal Audit 1 Proper Control One of the main objectives of an internal audit is to keep stringent control over all the activities of an organization The management needs assurance of ... View the full answer