Management audit for the financial area of ​​the electricity company las tunas

Summary

This work proposes a management audit program for the financial area of ​​the company that allows evaluating the degree of economy, efficiency and effectiveness in the use of the company's financial resources, and the behavior of human resources and control within of that area. This work will allow the company to have a financial management analysis tool where the causes that may affect it are explored and take the necessary measures for its eradication.

Introduction

The Las Tunas Electric Company, in abbreviated form OBE Las Tunas, with registered office at Carretera Central Km. 3 ½, was created by Resolution No. 83 dated February 23, 2001 issued by the Minister of Basic Industry, being directed its business activity to generate, transmit, distribute and commercialize electric power wholesale and retail. The work entitled Design of a Management Audit program for the financial area of ​​the Electric Company of Las Tunas responds to the need to integrate the management audit to a Management Control system that allows the increase in the degree of economy, efficiency and efficiency of all processes within the company.In order to fulfill the established objective, we prepared an Audit program that allowed us to carry out the Management Audit in compliance with the Generally Accepted Cuban Accounting Standards.

The Finance area was chosen to develop an Audit program with the objective of evaluating the financial management in the company. As the existing procedures for conducting management audits are appropriate for the different entities, it is necessary to create a program to carry out this audit in the financial area of ​​the Empresa Eléctrica de Las Tunas to assess the degree of compliance with the economy, the efficiency and the effectiveness with which the monetary and financial resources are planned and controlled by this department.

And we define the following problem:

Insufficiency in the use of Management Audit as an instrument for analyzing the financial management of the company.

The objective of our work is to design a management audit program and apply in the preliminary phase to assess the degree of compliance with the economy, efficiency and effectiveness in the financial area of ​​the company.

With the following hypothesis:

If management audit programs and procedures are designed and applied to the financial area of ​​the company, it is then possible to evaluate the degree of compliance of the economy, efficiency and effectiveness in the planning and control of monetary resources.

Management Audit Overview.

Management Audit Concept.

We can define administrative auditing as the comprehensive or partial examination of an organization in order to specify its level of performance and opportunities for improvement.

Different authors and scholars of the Audit have made their own definition of Management Audit. Let's look at some of these:

Norbeck: "Performance auditing is a relatively new control technique that provides management with a method of evaluating the effectiveness of operating procedures and internal controls."

William P. Leonard: “The Performance Audit can be defined as a complete and constructive examination of the organizational structure of a company, institution or government department; or of any other entity and of its methods of control, means of operation and employment that it gives to its human and material resources ”.

E. Hefferon: "It is the art of independently evaluating an entity's policies, plans, procedures, controls, and practices, in order to locate the fields that need improvement and make recommendations for achieving those improvements."

Chapman and Alonso: "It is a technical function, carried out by an expert in the field, which consists of the application of various procedures, aimed at allowing him to make a technical judgment." Fernández Arena JA maintains that it is an objective, methodical and complete review, the satisfaction of institutional objectives, based on the hierarchical levels of the company, in terms of its structure, and the individual participation of the members of the institution.

The concept given on the subject by the authors Cook and Winkle, says that:

“The operational audit is a comprehensive examination and evaluation of business operations in order to inform management if the various operations are carried out or not in order to comply with established policies directed towards the objectives of the administration. The audit includes the evaluation of the efficient use of both human and physical resources, as well as an evaluation of various operating procedures. The audit should also include recommendations for solutions to problems and methods to increase profit efficiency. ”

The Institute Of. International Auditors expressed in its Statement Of Responsibilities of 1947, that the Performance Audit has to do with the evolution of the way in which the administration is fulfilling its objectives, carrying out the managerial functions of planning, organization and control, achieving effective decisions in the fulfillment of the objectives set by the organization.

According to Res. 44/90 and Decree Law 159/1995, the Management or Operational Audit is defined as: “The examination and evaluation that is carried out on an entity to establish the degree of economy, efficiencies and effectiveness in planning, control and use of resources and verify compliance with the relevant provisions, with the aim of verifying the most rational use of resources and improving the activities and subjects examined ”.

Taking into account that the main basic elements, as stated in the previous definition, are economy, efficiency and effectiveness, we can say that:

Economy:

The concept of economics evaluates if the results are being obtained at the lowest possible alternative costs. It refers to the terms and conditions under which entities "acquire" human and material resources. An economic operation requires that these resources be obtainable in adequate quantity and quality, in a timely manner and at the lowest cost.

For an entity to work with economy, it is necessary that regarding Fixed Assets, Inventories and Workforce that:

• Don't buy, spend, and pay more than you need. In order to know if the entity complies with the aforementioned, the auditor should check whether, among other aspects, resources are rationally invested, namely whether:

• Use the appropriate raw materials, according to technical and quality parameters.

• Save these resources or lose them due to lack of control or poor storage and working conditions.

• Use adequate and necessary workforce.

• Workers take advantage of working hours, etc.

The analysis of the components of the total cost can also provide useful information to determine excessive, unnecessary and undue expenses.

Efficiency: Refers to the relationship between the goods or services produced and the resources used to produce them. An efficient operation produces the maximum of "product" for a given quantity of "inputs" or requires the minimum of "inputs" for a given quality and quantity of "product". The goal is to increase productivity.

It is equivalent to saying that the entity must carry out its activities always well. An efficient activity maximizes the result of a given input or minimizes the input of a given result.

Among others it must achieve:

• That the consumption or expense rules are correct and that the production or services comply with them.

• That the waste that originates in the production process or in the service provided is minimal.

• That the work rules are correct, • That the installed capacities are used to the maximum, • That the productive technical parameters are fulfilled, in the production or service process, that guarantee the required quality, and

• That all workers know the work to be done and that it is necessary and convenient for the activity.

It should be borne in mind that the efficiency of an operation is influenced not only by the quantity of production, but also by the quality and other characteristics of the product or service provided.

The result of the auditor's work will be to determine the degree of efficiency in the use of human and material resources in the performance of the entity's own activities, based on feasible considerations in accordance with the objective reality of the moment in which the entity performed the job.

Efficacy: Efficacy is understood as the degree of achievement of a goal, which can be expressed in terms of quantity, quality, time, cost, etc. Therefore, it is essential that the organization have detailed planning, with information systems and instruments that allow us to reliably and timely know the situation at a given moment and the deviations from the projected goals. If this does not exist, efficacy can hardly be measured.

This aspect has to do with the results of the entity's work process, so it must be verified:

• That the production or service has been fulfilled in the quantity and quality expected, • That the product obtained or the service provided be socially useful.

In summary, that the proposed objectives have been achieved.

The auditor should check compliance of production or service and make comparisons with previous periods to determine progress or setbacks.

These three elements must be related to each other, when the entity's results are presented in the auditor's final report.

Objectives of a Management Audit.

Among the priority objectives to implement it consistently we have the following:

Control.- Intended to guide efforts in its application and to evaluate organizational behavior in relation to pre-established standards.

Productivity.- They channel actions to optimize the use of resources in accordance with the administrative dynamics instituted by the organization.

Organizational.- They determine that their course supports the definition of the structure, competence, functions and processes through the effective management of the delegation of authority and teamwork.

Service.- They represent the way in which it can be verified that the organization is immersed in a process that links it quantitatively and qualitatively with the expectations and satisfaction of its customers.

Quality.- They provide that it tends to raise the performance levels of the organization in all its contents and areas, so that it produces highly competitive goods and services.

Of change.- They transform it into an instrument that makes the organization more permeable and receptive.

Learning.- They allow it to become an institutional learning mechanism so that the organization can assimilate its experiences and capitalize on them to turn them into opportunities for improvement.

Decision-making.- They translate their implementation and results into a solid instrument to support the organization's management process.

Specific objectives.

• Determine the degree to which the results or benefits provided by legal regulations, by the entity itself, the relevant program or activity, are being achieved. Establish whether the entity acquires, protects and uses its resources efficiently and economically. Determine if the entity, program or activity has complied with the applicable laws and regulations on efficiency and economy. Establish whether the management controls implemented in the entity or program are effective and ensure the efficient development of activities and operations. Review and evaluate the economy and efficiency with which human, material and financial resources have been used. Determine the objectives and proposed goals have been achieved. Provide a basis to improve the allocation of resources and the administration of these by the entity.Improve the quality of the information on the results of the administration of the entity that is available to state agencies and the community in general. Encourage the administration of the entity to produce processes aimed at providing information on the economy., efficiency and effectiveness, developing specific and measurable goals and objectives. Evaluate compliance with the legal and regulatory provisions applicable to government operations, as well as established plans, rules and procedures. Determine the degree to which the agency and its officials control and evaluate the quality of both the services it provides and the goods purchased. Audit and issue an opinion on the report and the financial statements,as well as on the degree of compliance with the action plans and budget of state companies and companies.

Management Audit Benefit.

• Administrative problems and operational difficulties can be detected before it happens, allowing the organization to avoid higher costs due to the deficiencies detected. It represents another administrative tool to help the organization in achieving the desired objectives since a of the causes of business failure is due to poor administration. It allows the company to recommend certain measures to improve the current situation. It relieves the management of important obligations dedicating itself to non-delegable matters. It extends the audit function to the entire company.Ensures detailed and objective information.It enables employees to work with order and methods. It forces the company to rethink situations in a continuous and healthy source of new ideas and applications.

So we can summarize that this audit helps the administration to reduce costs, increase profits and make better use of human, material and financial resources.

Management Audit procedures and techniques.

The audit procedures are specific operations that are applied in an audit and include techniques and practices considered necessary, according to the circumstances, so that the procedures can be defined as the description of the acts that the auditor will perform in compliance with the audit program. audit you are running.

Generally accepted audit procedures are described in general terms, so that they are specified or adapted to the case of each audit and in accordance with the professional judgment of each auditor.

Auditing techniques are practical methods of investigation and testing that the auditor uses to obtain necessary evidence to support his opinion; instead, auditing practices constitute the specific tasks performed by the auditor as part of the examination.

The most used audit techniques to gather evidence are:

Eye Verification Techniques	Oral verification techniques	Written verification techniques	Documentary verification techniques	Physical verification techniques
Comparison	Inquiry	Analysis	Verification	Inspection
Observation	Interview	Confirmation	computing
	Survey	Tabulation	Tracking
		Conciliation	Selective review

Eye verification techniques

Comparison is the act of observing the similarity or difference between two or more elements. Within the execution phase of the audit, the results are compared against acceptable criteria.

Observation is the eye examination performed to make sure that the operations are performed. This technique is useful in all phases of the audit, through which the auditor will ascertain certain facts and circumstances, especially those related to the manner of execution of operations, personally appreciating, openly or discreetly, such as the entity's staff executes the operations.

Oral verification techniques

Inquiry is the act of obtaining verbal information about a matter through direct inquiries or conversations with the responsible officials of the entity. The answer to a question asked by the auditor is an insignificant portion of elements of judgment that can be relied upon, but the answers to many interrelated questions can provide a satisfactory element of judgment, if all are reasonable and consistent..

The Interviews can be carried out to the personnel of the audited entity or beneficiaries of the programs or activities under their charge. For best results, you should prepare appropriately, specify who will be interviewed, define the questions to ask, alert the interviewee about the purpose and points to be addressed.

Surveys can be useful to collect information from a large universe of data or groups of people. Its main advantage lies in the economy in terms of cost and time; however, its disadvantage is manifested in its inflexibility, as it does not obtain more than what is requested, which in certain cases can be very expensive.

Written verification techniques.

Analyze consists of the separation and critical, objective and meticulous evaluation of the elements or parts that make up an operation, activity, transaction or process, in order to establish their nature, their relationship and compliance with existing regulatory and technical criteria. The analysis procedures are referred to the comparison of quantities, percentages and others.

Confirmation, is the technique that allows to verify the authenticity of the records and documents analyzed, through direct and written information, granted by officials who participate in or carry out the operations subject to examination (internal confirmation), so they are in a position to give valid and truthful opinions and information about them. Another form of confirmation is the so-called external confirmation, which is presented when a person independent of the audited organization (third parties) is requested information of interest that only she can supply.

Tabulation is the auditing technique that consists of grouping the results obtained into areas, segments or elements examined, in order to facilitate the preparation of conclusions. An example of applying this technique is the tabulation of the results obtained in the physical inventory of goods carried out in the entity's warehouse on a given date.

Reconciliation involves matching two separate and independent related data sets. This technique consists of analyzing the information produced by different operating units or entities, regarding the same operation or activity, in order to establish their agreement with each other and, at the same time, determine the validity and veracity of the reports, records and results. that are being examined.

Documentary verification techniques

Verification, a technique that is applied in the course of an examination, in order to verify the existence, legality, authenticity and legitimacy of the operations carried out by an entity, by verifying the documents that justify them.

Computing is the technique used to verify the accuracy and arithmetic correction of an operation or result. Only the accuracy of a calculation is tested, therefore, additional tests are required to establish the validity of the figures included in an operation.

Tracking is used to track and control an operation progressively, from one point to another of a certain internal process or, from one process to another carried out by a given operating unit. By understanding the internal control structure. This technique can be classified into two groups: a) progressive tracing, which starts from the authorization to carry out an operation until its total or partial completion; and, b) regressive tracking, which is inverse to the previous one, that is, it is based on the results of the operations to arrive at the initial authorization.

Selective review consists of rapid eye examination of a part of the data or items that make up a homogeneous universe in certain areas, activities or documents produced, in order to mentally separate issues that are not normal, given the high cost that would represent bringing carry out a comprehensive review or, for other reasons, it is not possible to carry out an in-depth analysis.

Physical verification techniques

Inspection is the physical and ocular examination of assets, works, documents and values, in order to establish their existence and authenticity. The application of this technique is very useful, especially in terms of finding cash, securities, fixed assets and other equivalents.

Stages for carrying out the Management Audit.

For its organization and development, the Management Audit comprises five general stages, which we will outline below.

1. Exploration and preliminary examination.

2. Planning.

3. Execution.

4. Report.

5. Follow-up.

Exploration and Preliminary Examination

This first phase is not the most important but it does constitute a guide for the subsequent work, thus facilitating the determination of fundamental questions such as: towards which area is the work directed, how many people are needed, the time, that is, create the conditions that allow establishing the quality control elements.

This is the study that, prior to the execution of the Audit, must be carried out in the entity.

• A tour of the areas that make up the entity in order to observe the operation as a whole. Review the information that works in the single file that contains the results of the Audits, inspections, checks and fiscal verifications. Evaluate the Internal Accounting Control System - Financial and Administrative taking into account:

• If the information systems are timely and dynamic.

• If the principles of Internal Control are complied with.

• Carry out all the appropriate verifications to reach conclusions regarding the effectiveness of Internal Control

• Verify the behavior of the means that guarantee the effectiveness of the

• Internal control.

• Examine and evaluate documents, operations and financial statements.

• Evaluate the reliability, sufficiency and timeliness of the Systems

• Automated information processing.

Financial situation:

• Analyze compliance with fundamental economic indicators.

• Cost Systems, including cost centers by areas of responsibility, expense budgets and their behavior.

• Verify the sources of financing.

• Availability.

• Indebtedness.

Human Resources:

• Organizational structure and functions.

• Number of workers by occupational category with their respective qualifications.

• Formation, development and training.

• Level of protection and hygiene at work.

• Stocks of work standards.

• Conduct interviews deemed necessary with leaders, technicians, workers, including political and mass organizations.

Planning.

The planning of the audit refers to the determination of the objectives and scope of the audit, the time required, the criteria, the methodology to be applied and the definition of the resources considered necessary to guarantee that the examination covers the most extensive activities. of the entity, the systems and their corresponding key controls.

The planning process ensures that the audit result meets your objectives and has truly productive effects. Its careful implementation is especially important when evaluating the effectiveness, efficiency and economy in government programs or activities, since the procedures applied are complex and varied. For this reason, the planning aims to establish an adequate balance between the objectives and scope of the audit, the time available to carry it out, and the number of hours that professional staff must work to achieve an optimal level of use of the resources allocated to the audit. audit.

• The analysis of the elements obtained in the exploration should lead to:

• Define the aspects that should be checked, by the expectations that the exploration gave, as well as determining the areas, functions and critical matters.

• Analyze the reiteration of deficiencies and their causes.

• Define the forms or means of verification to be used.

• Definition of the specific objectives of the Audit. Determination of the auditors and other specialists that are required, attending to the proposed objectives, the magnitude of the work and its complexity. Flexible programs tailored specifically, according to the objectives set, that respond to the checking the three E.

These must be prepared by the acting auditors, reviewed by the head of the Audit and approved by the supervisor or by the head of the area.

• Determination of the time that will be used to carry out the Audit, as well as its budget.

The planning phase of the performance audit comprises two stages:

• General Review

- Understanding of the entity to examine.

- Preliminary analysis in the entity.

- Formulation of the strategic review plan.

The general review stage begins with an understanding of the entity, program, or activity to be examined. The audit team must acquire effective knowledge of the activities and operations of the entity to be visited, identifying aspects such as: purposes, objectives and goals, assigned resources, key management systems and controls. For this, the auditor should review various elements as follows:

a) Applicable laws and regulations, program publications on the development of its activities.

b) financial administration rules and requirements stipulated in the budget law.

c) information on follow-up of corrective measures derived from previous reports.

d) documentation on the entity or program in the permanent file of the Comptroller General of the Republic or the internal audit body.

• Strategic Review

- Execution of the plan.

- Application of preliminary tests audit criteria.

- Identification of the most important issues.

- Formulation of the strategic review report.

The strategic review stage emphasizes the knowledge and understanding of the entity, program or activity to be examined, through the collection of information or physical observation of its operations. This task involves the preliminary analysis in the entity itself on various matters such as: internal control environment, external and internal factors, general areas of review and sources of audit criteria.

Information sources for the Strategic Review.

The information that may be collected during the Strategic Review process should be aimed at determining which are the general areas of review that are considered of greatest importance. The search for information sources about the entity, program or activity to be examined should take into account the following:

Questions	Required information	Product
Than?	Rules, policies and procedures applicable to key systems and controls Legal authority, background of the entity, program or activity, budget and financial reports.	Identification of the entity
Why?	Identified sources of criteria Objectives, goals and strategic direction responsibility	Line of functional responsibility
How?	Interview with officials Main processes, operating methods and systems.	Management systems
Than?	Internal documents Division of functions and responsibilities.	Organization
Where?	Observations of the environment Scope of action of the entity, program or activity, environment, managerial staff and workers.	Location, internal and external factors.
When?	Internal or external evaluation studies Important dates and events, variations in time and useful life of programs or activities.	Important situations in time

Execution.

* Verify all the information obtained verbally.

* Obtain sufficient, competent and relevant evidence, taking

consider:

• That the tests determine the causes and conditions

originating breaches and deviations.

• Quantify as much as possible to determine the

default price.

• That the tests can be external if it is considered

necessary.

* Pay special attention that the Audit serves as an instrument to

contribute to making smart and timely decisions.

* The work of specialists who are not auditors must be carried out

based on the objectives defined in the planning.

* The group leader should be in charge of the orientation and review of the

job.

* Work must be adequately supervised by a specialist from the

Audit unit.

* Determine in detail the degree of compliance with the three E's, taking into account

Account: Condition, Criterion, Effect and Cause.

Report.

The presentation of the Audit Report must express in a concrete, clear and simple way the problems, their causes and effects, with a view to assuming it by the executives of the entity as a management tool.

Notwithstanding the above, the following should be considered:

* Introduction: The objectives that will be exposed in this segment will be

the specific ones that were defined in the second stage «Planning».

* Conclusions: The price of the

non-compliance, that is, the economic effect of inefficiencies, wasteful practices, breaches and deficiencies in general. I know

They will also reflect, in summary form, the causes and conditions that

affected the degree of compliance with the three «E» and their interrelation

* Body of the Report: Make an assessment of the effectiveness of

current regulations. Everything that is quantifiable must

quantify.

* Recommendations: These should be general and constructive, the Audit not committing itself to future situations that may occur in the entity.

* Annexes: The items that make up the price of default (material damages and economic damages) as well as a summary of responsibilities can be shown in summary form.

* Synthesis: Sometimes it is necessary to prepare a summary that will reflect the most relevant findings in a pleasant, transparent, precise and concise way that motivates the reading.

Tracing.

It is advisable, according to the degree of deterioration of the three E that is observed, to carry out a verification carried out between one and two years, which allows knowing to what extent the administration was receptive to the findings shown and the recommendations given in any of the circumstances, that is, whether the administration of the entity was kept in the hands of the same personnel, as if it had been replaced by its mistakes.

Development of a finding.

The Dictionary of the Spanish Language of the Royal Academy considers that the term discovery has three meanings: a) found thing; b) action and effect of finding; and c) casual encounter of other people's movable thing that is not quota treasure; typical of the field of law. Even though the first concept could be associated with auditing; the second meaning on action and effect of finding, defines more precisely the nature of the finding that refers to the effect of detecting something important; however, this term has many meanings and conveys a different one to different people.

Generally, the term finding is used in a critical sense and refers to weaknesses in internal controls detected by the auditor. Therefore, it covers facts and other information obtained by the auditor that deserve to be communicated to the responsible officials of the audited entity and other interested persons.

Definition of finding.

An audit finding is the result of the comparison that is made between a criterion and the current situation found during the examination of an area, activity or operation. It is all information that, in the auditor's opinion, allows him to identify important facts or circumstances that affect the management of resources in the entity or program under examination that deserve to be communicated in the report. Its elements are: condition, criteria, cause and effect.

The elements of the audit finding are:

Condition: Current situation found.

Criterion: Applicable standard

The requirements that an audit finding must meet are:

• Relative importance that deserves to be communicated. Based on facts and precise evidence contained in the working papers.

• Objective. Convincing for a person who has not participated in the audit.

Factors that affect the development of a finding.

The auditor should be trained in the techniques to develop findings objectively and realistically. When doing your job you should consider the following factors:

• Conditions at the time the event occurs.

• Nature, complexity and financial magnitude of the operations examined.

• Critical analysis of each important finding.

• The audit work must be complete.

• Legal authority.

• Differences of opinion.

Conditions at the time of the event. The auditor must take into account when carrying out his work the circumstances that surrounded the fact or transaction analyzed, but not those that existed at the time of carrying out the examination. To act objectively and fairly and realistically, the auditor should avoid making judgments about the entity's performance, supported by late perceptions; as well as assuming the burden of proof if its evaluation leads you to argue that the decision made by the entity was incorrect or inappropriate, according to the situation examined.

Nature, complexity and financial magnitude of the operations examined. The auditor should always be interested in improving the entity's efficiency and performance in the development of its activities; however, it is inconvenient to criticize any matter that is not perfect. Reporting to the entity about important matters should compel a serious evaluation of the matters, so that the information that is communicated reflects a mature and realistic judgment, from what in reasonable terms it is possible to expect, according to the circumstances..

Critical analysis of each important finding. It is necessary for the auditor to submit all potential findings to a critical analysis, in order to locate possible flaws or illogical reasoning when relating the facts and situations found with the criteria to be compared. The application of techniques to improve decision making and counteract group thinking and predispositions of knowledge known as: devil's advocate and dialectical study, can be useful for identifying weak points in the structure of findings and observations..

The devil's advocate involves the generation of a plan, such as critical analysis of oneself; a member of the group acts as such and presents all the arguments that could make the finding proposal unacceptable. The dialectical study is more complex, since it implies the generation of a plan (thesis) and an opposite plan (antithesis); The debate between the defenders and their opponents aims to reveal defined problems, courses of action and assumptions, finally structuring a new and more complete conception of the problem, which becomes a synthesis. This exercise allows the auditor to be alert against the natural tendency to rationalize interpretations of facts and analogous situations, leaving aside the contrary information.

The audit work must be complete. If the tasks carried out by the auditor and the collection of evidence are carried out sufficiently and completely, this will not only adequately support the observations, conclusions and recommendations, but will also demonstrate to third parties their property and rationality in convincing terms. However, since audit work can be carried out in areas in which auditors are not specialists, it is often useful to request the services of expert consultants to resolve technical issues, especially when there are no specialized auditors in certain fields.

Legal authority. Current legislation confers a degree of discretion on an entity's operations, with which the auditor cannot and should not interfere. It is the responsibility of the internal or external auditor to report on cases in which the entity is not complying with the laws or regulatory standards, as well as to recommend the necessary measures to avoid the occurrence of undue expenses or ensure their recovery through corrective action that dictates the audited entity.

Differences of opinion. In the exercise of their discretion, the officers of the entity may make decisions with which the auditor does not agree. Such decisions should not be criticized if they were made on the basis of adequate consideration of the facts at the appropriate time. The auditor should not criticize the decisions made by the officials, simply by having a different opinion about their nature and the circumstances in which it should have been adopted. In preparing the findings, the auditor should not substitute the judgment of the officials of the entity under review.

Aspects to consider when preparing the audit findings.

Be referred to significant matters and include sufficient and competent information related to the evaluation made to the management of the examined entity, as well as regarding the use of public resources, in terms of effectiveness, efficiency and economy; include the necessary information regarding the background, in order to facilitate its understanding and, refer to any deficient and relevant situation that is determined from the application of audit procedures.

The elements of the audit finding are as follows:

• Condition

• Criterion

• Effect

• Cause

• Condition.

Understand the current situation encountered by the auditor when examining an area, activity, or transaction. The condition, understood as what it is, reflects the way in which the criterion is being achieved. It is important that the condition makes direct reference to the criterion, since its purpose is to describe the behavior of the audited entity in achieving the goals expressed as criteria. The condition can take three forms:

• The criteria have not been satisfactorily achieved.

• The criteria are not met.

• The criteria are being partially achieved.

Individual cases that refer to a specific type of deficiency that is not widespread, can sometimes be important in view of their nature, magnitude or potential risk, such as to require special treatment in the audit report. A negative condition detected in a program or activity that has just started operations may not be very widespread; however, it could have greater implications if not corrected in a timely manner.

Criterion

It comprises the standard by which the auditor measures the condition. It is also the goal that the entity is trying to achieve or represents the unit of measure that allows the evaluation of the current condition. Likewise, the transgressed norm of a legal-operational or control nature that regulates the actions of the examined entity is called a criterion. The audit plan should indicate the criteria to be used. The auditor is responsible for selecting criteria that are reasonable, feasible, and applicable to the matters under review. If any of the criteria established during the planning phase have been reformulated, the auditor must coordinate the case with the entity's administration, before using it in the examination.

The criteria can be the following:

• Provisions applicable to the entity

- Laws.

- Regulations.

- Internal Politics.

- Plans: monthly goals and objectives.

- Rules.

- Organization and function manuals.

- Directives, procedures.

- Other provisions.

• Developed by the auditor

- Common sense, logical and convincing.

- Auditor's experience.

- Performance of similar entities.

- Prudent practices.

Default price.

Sum of the effects produced by the breaches, uneconomic practices, inefficiencies, inefficiencies, economic damages, material, financial and human damages that are detected in the entity that have repercussions in society and the state.

It is the synthetic expression of the results of the Management Audit.

The following questions may be asked:

Than.

When.

Regarding.

For what.

Compared to

Who.

That may be answered by indexes and financial reasons, to fit:

• Income not received due to breaches of objectives

planned for a certain period.

• of price for affectations of the quality parameters.

• Unsupported wage payments in production or services.

• Excess consumption due to non-application of standards or other measurement parameters.

• Excess adjustments due to shortages, losses, deterioration and others.

Sampling in the Management Audit.

The use of sampling procedures is one of the basic reasons why the auditor's report is seen as an expression of an opinion and not as absolute certification of the subject under review.

In determining the size and extent of the sample and other tests to be carried out during the course of the work, the auditor's appreciation of the reliability of the internal control established by the entity has a significant influence.

Likewise, it must specify the costs, risks and benefits that the type of sampling that will be used in each case represents, without losing sight of the characteristics of the entity being audited, relative or absolute importance of the subject, high-risk areas, sample size, background, personal appreciation, as well as any other element that allows an adequate determination.

In the selection of samples, the auditor must follow the following principles:

1. Base your opinions only on the populations where the sample is drawn.

2. The sample must be representative of the universe and for it to be so, each element of it must have an equal probability of being selected.

3. Make sure that no particular element of the universe modifies the eventual character of the sample.

4. Avoid that personal inclinations influence the selection of the sample.

Sample size

An important decision for the auditor involves determining the amount and type of evidence to be collected. An important aspect of this decision is the answer to the question: How large should the selected sample be?

Factors the auditor should consider when planning sample sizes include the following:

Internal control.

Importance of audit risk.

Internal control is part of the auditor's decision on sample size because the amount of audit evidence needed varies within certain limits, inversely with the effectiveness of internal control. For example, relatively larger sample sizes are generally required for audits of entities with poor internal controls than for those with good internal control.

Importance needs to be taken into account when determining sample size because if the other factors remain unchanged, the more important the area being tested the more evidence is needed. The auditor should also assess what constitutes a material error in the financial statements in order to make an appropriate determination about any errors discovered during the conduct of the audit.

Selection of the sample size according to the auditor's opinion.

In current practice, the determination of the operations to be verified and the scope of such verification is fundamentally the responsibility of the group leader. There are no generally accepted percentages, tables, or rules for selecting audit samples; rather, the auditor selects the operations to be examined, taking into consideration his knowledge of internal control, the relative importance of operations, areas of risk, and the types of errors found in this and previous audits.

MANAGEMENT AUDIT PROGRAM FOR THE FINANCIAL AREA OF THE COMPANY.

Characterization of the Las Tunas Electric Company. Current Business Object.

The Las Tunas Electric Company, in abbreviated form OBE Las Tunas, with registered office at Carretera Central Km. 3 ½, was created by Resolution No. 83 dated February 23, 2001 issued by the Minister of Basic Industry, being directed its business activity to generate, transmit, distribute and commercialize electric power wholesale and retail.

That by means of Resolution No. 233 of April 27, 2006 of the Minister of Economy and Planning, in its seventh section, the business purpose of the Electric Company Las Tunas was modified, which states verbatim:

• Generate, transmit, distribute and commercialize electrical energy in Cuban pesos and convertible pesos wholesale and in Cuban pesos retail.

• Provide engineering project services, in pesos, national currency; Construction, dismantling, assembly, repair and maintenance of overhead and underground electrical installations to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Carry out work to correct the power factor, accommodation and load control, to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Provide technical services related to the efficient use of electrical energy and for electrical networks to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Provide rental, assembly, and maintenance services to generators to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Carry out the verification and certification of the dielectric capacities of protection means to work with electricity in Cuban pesos.

• Offer repair services, maintenance of static and rotating electrical equipment to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Carry out electrification projects, improvements and modernization of electrical networks, as well as exterior and interior lighting in Cuban pesos.

• Provide repair, maintenance, calibration of equipment and measurement facilities to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Provide communication services to the entities of the Electricity Union in Cuban pesos and the Ministry of Basic Industry based in the province, through their own communication channels, in Cuban pesos and convertible pesos.

• Provide support services or tolls through the post offices to the communications entities of the province in Cuban pesos and convertible pesos.

• Provide construction, assembly, repair, adjustment and maintenance services to communication systems, electrical and automatic protections to the Unión Eléctrica system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Produce and commercialize transformers, means of protection for working in overhead lines, disconnects, single-pole and air switches, as well as offering repair and maintenance services to the Electric Union system in Cuban pesos and to other entities in Cuban pesos and convertible pesos.

• Commercialize scrap metal to companies in the Union of Recovery of Raw Materials in Cuban pesos and convertible pesos.

• Wholesale marketing of idle and slow-moving materials in Cuban pesos.

• Provide parking services; rental of warehouses and premises; cargo transportation, rental of technological equipment for electrical assembly; document printing and reproduction; of technical consulting for the repair, maintenance, construction, designs and projects of electrical networks, all of them in Cuban pesos.

Characterization of the finance department.

The department belongs to the accounting and finance area, it has a staff of 4 workers (1 graduate, 2 technicians and one trained. Within the models that make up the Financial Statements and that are prepared by the company, this area affects practically all in one way or another, the models that are issued are:

* State of situation.

* Statement of income.

* State of origin and application of funds.

* Statement of cash flows

* Balance 101 accounts Annex (Accounts receivable and payable).

* Expenses and income Annex 201

* Expenses per Annex 301 element

* Budget Execution of Income or Expenses in Freely Convertible Currency.

* Report attached to the financial statements.

* Financial reasons.

Functions of the Finance department.

1. Organize and control the financial activity of the Empresa Eléctrica Las Tunas.

2. Contribute to the process of preparing strategic planning and management by objectives, taking into account the policy established by the Minbas.

3. Coordinate and control the process of preparing the Business Plan and the budgets of the Electric Company of Las Tunas and its Base Business Units in accordance with the guidelines and orientations issued by the Minbas Group, in the manner that the basic objectives of its operation.

4. Present and defend the plan, the budget of income and expenses of the Electric Company of Las Tunas, and of this the budget in currency, before the Minbas, and organize the forms and methods that favor its execution in volume, economic efficiency and expected quality.

5. Analyze and evaluate the economic and financial results of the Empresa Eléctrica de Las Tunas and its Base Business Units.

6. Execute efficient payment management that contributes to meeting the obligations contracted.

7. Develop functions in the management of the finances of the Electric Company of Las Tunas.

To fulfill these functions, they perform various tasks, which we list below:

1. Analysis of availability in the two currencies.

2. Analysis of account statements.

3. Preparation of cash flow.

4. Analysis of accounts receivable and payable and their records.

5. Make reconciliations with customers.

6. Control of checks issued.

7. Control of the records of diets, advances and settlement of travel expenses.

8. Provide all the company's financial information in a timely manner.

Objectives of the Management Audit for the finance area.

This audit covers two objectives:

1) Evaluate the effectiveness of the department in providing guidance and financial control to the entire organization, including its various operating units.

2) Measure the internal efficiency of the finance function in terms of financial, accounting and budgetary procedures, policies and standards.

Audit Program.

As previously discussed, the audit program is the set of procedures and actions that the auditor must perform in order to achieve the objectives set, achieve sufficient and competent evidence with a minimum of error.

It is difficult, if not impossible, that a program can be created that meets all expectations, since good auditor preparation is very important and the procedures to be followed are not always the same, as they will depend on the particular circumstances of each entity.

On this Montgomery raises the following:

“Nothing can do more harm to those who do this study than the exclusive use of condensed work rules; all those who exercise their profession according to programs that have been formulated by other people are guilty of negligence, they do allow immutable rules to nullify all their independence of judgment. However, there is no downside to using a summary of the procedures to be followed in almost all audits, as long as the summary is based on the fundamental principles of the audit and is implemented on that basis. ”

Although we agree with this criterion, the reality is that it is necessary to prepare a program that serves as a general guide in the work development of the auditors and that it is adjustable. The typical outline of an audit program includes the following:

Audit topic: Where the area to be audited is identified.

Audit Objectives: Where the purpose of the audit work to be performed is indicated.

Audit scopes: Here the specific systems or organizational units to be included in the review in a given period of time are identified.

Preplanning: Where the resources and skills needed to carry out the work are identified, as well as the sources of information for testing or review and the physical places or facilities where it will be audited.

Aspects to take into account in the preparation of the management audit program.

1.- Plans and Objectives.

Examine and discuss with management the current status of plans and objectives.

2.- Organization.

a) Study the organization structure in the area that is valued.

b) Compare the present structure with the one that appears in the organization chart of the company, (if there is one).

c) Ensure whether or not a full estimate is granted to the principles of good organization, operation and departmentalization.

3.- Policies and Practices.

Do a study to see what action (if required) should be taken to improve the effectiveness of policies and practices.

4.- Regulations.

Determine if the company cares about complying with state and local regulations.

5.- Systems and Procedures.

Study the systems and procedures to see if they have deficiencies or irregularities in their elements under examination and devise methods to achieve improvements.

6.- Controls.

Determine if the control methods are adequate and effective.

7.- Operations.

Evaluate operations in order to specify which aspects need better control, communication, coordination, in order to achieve better results.

8.- Personnel.

Study the general needs of personnel and their application to work in the area subject to evaluation.

9.- Physical Equipment and its Disposition.

To determine if improvements could be made in the equipment layout for a better or more extensive use of it.

10.- Report.

Prepare a report of the deficiencies found and record in it the appropriate remedies.

The program allows:

Organize work properly.

Facilitates the replacement of auditors.

Avoid work interruptions due to the lack of the head of audit.

It offers a detailed record of everything done and is of great help in preparing the report.

Study and evaluate the Internal Control System.

Issue an opinion through an opinion on the reasonableness and reliability of the Accounting.

Program to carry out a Management Audit in the Accounting and Finance area:

1) Verify if the responsibilities and functions of the personnel of the financial area are well defined.

2) Verify if the department is adequately staffed and how its management influences the ethics of workers in the area.

3) Verify if the structure of the finance department is compatible with the other departments of the entity.

4) Check if there are procedures manuals for each job and if they are known by workers in the financial area.

5) Verify if there is good communication between workers in the financial area and with other areas of the entity.

6) Verify if there are adequate internal controls for the separation of functions in the automated processes and programs.

7) Verify if the working conditions are the most suitable.

8.) Verify if the structure of the area allows the fulfillment of the established objectives.

9) Check if the training is planned according to the needs of each one.

10) Verify the extent to which the appropriate policies and procedures for hiring, training, promoting and remunerating employees are in force.

11) Check the suitability of reviewing the records of the jobs.

12) Verify if this department provides guidance for the formulation of the company's strategic objectives.

13) Verify if a budget is formulated for each operational unit in support of increased profitability and efficiency.

14) Check if flexible budgets are actually expressed in order to compare them with the true results.

15) Evaluate if the resources planned are necessary to achieve the short, medium and long-term objectives.

16) Verify if there are adequate models to make or prepare a budget that allow easy location of information and efficient interpretation of it.

17) Verify the efficiency in the operations of collections and payments.

18) Verify compliance with laws and regulations.

19) Verify if the cash flow statement is prepared and if projections are made.

20) Verify if the general accounting control reports are timely, simple to use and adequately designed so that the necessary information is easily obtained.

21) Verify if the performance regarding the short, long and medium term plans is measured and reviewed periodically to keep them up to date.

22) Verify if the accounting information is reviewed before transmitting it to the appropriate source.

23) Verify if the predetermined financial and accounting data are compared with the actual results.

24) Verify the sufficiency and opportunity with which the information that allows to supervise the objectives, the strategies and the financial situation is analyzed.

25) Verify if the economic-financial analyzes allow an effective measurement of the economy, efficiency and effectiveness of the entity's operations.

26) Verify if corrective action is taken when significant accounting and financial deviations are detected.

Procedures and methods used in conducting the performance audit.

In our work, the preliminary phase was carried out through an audit program that allowed us to evaluate internal control and characterize the object. To carry out the audit work, various documents and resolutions that govern the performance of the work in this department were taken into account, such as:

• Business improvement record of the company.

• Template of human resources positions, which describes the functions of each job in the financial area.

• Resolutions 56/2000 of the BCC, where the payment instruments, their way of use and credit rights are established.

• BCC Resolution 64/2000 of 10/19/00 "Complementary norms for collections and payments".

• Res. 297/2003 MFP "Definitions of Internal Control".

In addition, resolution 26/2006 of the Ministry of Audit and Control, “Methodological Guide to Management Audit” was taken into account.

The single audit file was reviewed, finding deficiencies in previous years in the accounts receivable reconciliation process.

Through interviews with the workers in the area and with the review of documents such as those previously exposed, the organizational structure and functions of the audited area were learned, in addition to the characteristics of the service it performs.

The department has five workers, including 2 graduates and 3 middle technicians; these last ones are studying the degree. The company belongs to Minbas and its main sources of financing are central budget allocations.

The internal control guide was applied in the points corresponding to the financial area in order to have a criterion of the existing internal control system in it.

Through interviews with the department head, the procedures for preparing the budget were learned. Automated information, reports and other documents that provide general information on the financial situation were reviewed and analytical review methods were applied using various financial reasons to evaluate the behavior of the economy, efficiency and effectiveness in planning and safeguarding resources. money of the Provincial Electric Company of Las Tunas.

The records of collections and payments are automated, carrying the primary information by suppliers and customers and the report of these accounts is issued by age each month.

The purchase request in foreign currency is made in the financial area as a control mechanism by the central body of the company.

Various financial ratios were applied to measure the efficiency and effectiveness of the performance of the financial area and comparisons were made with the same period of the previous year.

AUDIT REPORT

A: Director of the economic area.

Work Order No. 03/2008.

Audited entity: Finance area of ​​the Empresa Eléctrica de Las Tunas.

Subordinated to: Ministry of Basic Industry.

Audit type: Management or Operational.

Start date. 05-01-2008

Completion date 20-06-2008

Chief Auditor: Yanela Gallart Molina.

Introduction:

This management audit work was carried out in the finance department of the Empresa Eléctrica de Las Tunas, through which operations corresponding to 2008 were reviewed and comparisons were made with 2007 when we deemed it necessary, the internal accounting and administrative control.

The Electric Company of Las Tunas with registered office at Carretera Central Km. 3 ½. The Department has a staff of 4 workers. This Department is subordinated to the direction of economy of the company.

Its main objective is the planning and presentation of financial and economic information, ensuring efficient use and control of the budget.

The Management Audit program was applied according to the established objectives.

Compliance with current legislation, internal control principles, Cuban accounting standards, as well as economic management in planning, control and use of resources was verified.

The work was carried out through detailed tests covering the audit period.

Our work was carried out in accordance with generally accepted auditing standards, establishing an element of quality control that allowed us to meet the objectives proposed in the work through the advice and consultation of various specialists who allowed us to carry out our work.

The financial department's main objective is:

Achieve a level of material assurance and economic efficiency that guarantees the operation of the company with an availability of material and financial resources, with an efficient use and control of them.

The audit aimed to:

• Evaluate the effectiveness of the department in providing guidance and financial control to the entire organization, including its various operating units.

• Measure the internal efficiency of the finance function in terms of financial, accounting, and budgetary procedures, policies, and standards.

Conclusions.

In accordance with the deficiencies detected in the course of the audit, we evaluated the Financial Area of ​​the Electric Company and determined that the economy, efficiency and effectiveness show a degree of partial deterioration since they present deficiencies in the organization, and the analysis.

Results.

1. The organizational structure of the department management is too burdened for the lead specialist.

2. Personnel are not rotated by jobs.

3. The economic and financial analyzes are carried out but not with the depth required for their interpretation and with the participation of all the personnel in the financial area.

4. The financial situation of the entity may be affected by the deterioration of the main financial reasons analyzed.

5. The potential of the technology they possess and the knowledge of existing personnel are not fully exploited.

6. Prepare the plan of measures to eradicate the deficiencies detected.

Recommendations.

Based on the analyzes carried out in the audit to express the previous results, we can recommend to the management of the entity and the financial area that:

The structure of the department is analyzed to achieve an efficient distribution of work that allows all its members to contribute to achieving the proposed objectives.

Deepening the quality of the economic-financial analysis that is presented to the company's management, where not only figures are expressed but criteria and recommendations are issued by the financial area.

Make the most of the intellectual capacities of the members of this area, where the majority are professionals and there is work experience.

Use existing technology to implement programs that allow you to perform analysis of financial indicators and the general situation of the entity.

It should be borne in mind that in accordance with the provisions of article 7, subsection k, of decree law 159 of the audit, the entity must inform this audit unit, within a period not exceeding 180 calendar days from the date of completion of the audit, the situation presented by the deficiencies presented and pointed out in this preliminary report; as well as the disciplinary measures applied to the responsible personnel.

If there is any discrepancy with the content of the report, the entity must communicate its releases to the audit unit, within 10 days after delivery of the report.

The directors, consultants and workers of the company and mainly from the financial area are thanked for the collaboration provided during the audit.

CONCLUSIONS

The performance audit constitutes an important element within the management control of the company.

The performance audit allows to detect deficiencies that affect the economy, efficiency and effectiveness of the entity.

The proposed program can be used by internal and external auditors and allows to reveal the negative aspects that affect the economic-financial management of the audited area.

The use of this Program allows internal and inexperienced auditors to carry out the audit in a logical sequence.

RECOMMENDATIONS

Use the performance audit as a tool to evaluate the economy, efficiency and effectiveness of the Electric Company of Las Tunas.

The entity's internal auditors must use the proposed program in the performance of their work to contribute to the improvement of the company's different indicators.

Carry out performance audits once or twice a year.

BIBLIOGRAPHY

1. Operations Administration, Decision Making in the Operations Function, Volume 1 and 2, 3rd Edition

2. Human Resources Administration, Volume 1 and 2

3. Administrative Audit with Work Questionnaires

4. Management Audit: Second Edition - Havana City: Editorial Pueblo y Educación 1985

5. Methodological Guide for Conducting Management Audits. National Audit Office October 1996.

6. Holmes AW, AW, CPA, and Overny W., CPA, Principles of Audit Continental SA de CV., Mexico.

7. John W. Cook and Gary M. Winkle (1987), Audit, 3rd edition, McGRAW-HILL Editorial, Buenos Aires - Argentina.

8. Koontz, Harold. Elements of Administration / Harold Koontz - 5th Edition.

9. Kotler, Phillip. Marketing, Planning Analysis, Management and Control Division / Phillip Kotler. Volume 2, 7th Edition.

10. Leonard, William P. Administrative Audit. Ed. Diana. Mexico, DF 1991.

Norbeck, EF Administrative Audit. Editora Técnica, SA México, DF 1970.

11. Perdomo, A. Analysis and Interpretation of Financial Statements / A Perdomo. México: Ediciones Contables y Administrativas S. A, 1986.

12. Resolution 297/03 of the Ministry of Audit and Control.

13. Resolution 026/06 of the Ministry of Audit and Control.

14.www.gestiopolis.com/recursos/documentos/fulldocs/fin1/auditeliana.htm

Author: Yanela Gallart Molina

I was born in the municipality of Las Tunas, Las Tunas Province, Cuba. I am a graduate in Accounting and Finance at the Vladimir Ilich Lenin University Center in the province of Las Tunas.

I am currently studying for a Master in Management Accounting at the Vladimir Ilich Lenin University Center in the province of Las Tunas, the work that I have formed is part of the investigative activity that we have been carrying out in the course of our training as a master. The work was carried out in June 2008.

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