This work is related to Operational Audit and Internal control, for this we will begin by defining the concept, a brief description of the modern approach to Operational Audit, objectives, scope and importance; Internal Control evaluation using a practical methodology and adaptable to our reality, under the regulations issued by the Governing Body of the National Control System, that is, by the Office of the Comptroller General of the Republic.
Flowchart models have been designed for some operations of greater importance to the company that are the subject of the auditor's work. Likewise, for management control a risk map is included, concepts and description of the main indicators, their measurement and importance, it also includes the design of Internal Control questionnaires, audit programs with the procedures in this case applied to the Sector Governmental.
operational-audit-and-internal-control-1This work is expected to contribute to the expansion of the auditor's knowledge, such as the study of the company, mastering the main techniques in line with modernity and technological progress, which in our time represents an important challenge for the auditor's work, how it is their commitment and responsibility in the face of the modification of ISA 700 on Auditor's Reports, applicable to 2006. Conclusions, Bibliography and Annexes.
The Operational Audit
Definition:
The operational audit is an objective, constructive, systematic and professional evaluation of the activities related to the management process of an organization, in order to determine the degree of efficiency, effectiveness, effectiveness, economy, equity, excellence and valuation of environmental costs, with which resources are managed; the adequacy and reliability of the information and control systems, so that it complies with the policies established to achieve its objectives.
The emerging reports of this type of audit are:
a) Operational Audit, basically related to the objectives of effectiveness, efficiency and economy.
b) Evaluations of the Internal Control System, whose purpose is to evaluate the design and operation of the established Systems.
Modern approach to operational auditing
It will take into account:
- Evaluation of the planning of the company: It allows to specify the administrative and operational deficiencies in the planning, not only in the upper and middle levels of an organization, but also in the lower levels. It includes the overview and mission, objectives or goals, plans, strategies, programs, policies, procedures and standards.
- Accounting and Finance Assessment: Capital resources are essential for management to meet its goals and objectives. Therefore, it is necessary to evaluate the accounting records, periodic financial balances, income statement, etc. Evaluation of the marketing function: Through questionnaires, the general vision of marketing, sales, market research, advertising and physical distribution can be evaluated. Evaluation of Research and Development and Engineering: These areas are also analyzed due to their importance for the growth of a company. A productive effort in research and development is a source of new products. The Engineering function is concerned with establishing the appropriate conditions for manufacturing and testing. Evaluation of the production function:This must be planned, programmed, directed and controlled to produce the desired final merchandise, so that it reaches the client in the programmed term.
It comprises the overview of production, inventories and purchases.
- Evaluation of the staff function: The difficulty of evaluating the human factor makes this evaluation difficult. The following are assessed for this role: staff overview, workforce planning, and industrial relations.
- Evaluation of the work environment and the human element: Constant changes in the work environment affect the performance of an organization, therefore the adequacy of the work structure must be evaluated with respect to the current moment. Evaluation of the information system: It must be determined the degree of managerial control over the information system. Controls to the computer department, inputs, programs and output controls and interactive and security controls are evaluated.
Business Strategies supported by Information Technology.
The economic context is infused with distinctive connotations such as the aggressive pressure of competitiveness and the new rules of the game imposed by globalization; To this must be added the speed of real-time communications and the upward support of technology. Therefore, the following points must be taken into account: Vision and mission. Strategic planning and implementation process. Strategic drive and strategies. Competitiveness. Globalization. The organization of the future. New business and operation models. Information Technology, to support the implementation of the strategy such as CRM (Customer Relationship Management), others.
corporate governance
In the investigation of the causes causing the financial scandals of recent years, the absence of effective Corporate Governance was evident, the concentration of all authority in the Manager or CEO (Chief Executive Officer) with disproportionate income levels, endorsed his responsibility without evaluating the impact of what they “authorized”, as well as the power bridge between the General Manager and the Chief Financial Officer (CFO- Chief Financial Officer), disregarding other lawsuits such as the Board of Directors, Internal and External Audit, the operational establishment at the highest level of the Audit Committee, among others.
Independence of the Public Accountant in the Professional Practice
The financial scandals, in addition to malpractice, accommodative interpretations, misrepresentation of the criterion of prudence or conservatism and the creation of legal-accounting figures in the Enron fraud, undoubtedly had the common denominator of ethical violations due to the client's collusion with the client. audit entity, showing a lack of independence.
Key factors that must support the Auditor's Independence:
- The new guidelines on auditor independence established by the new IFAC Code of Ethics, as well as its degree of solidity. Criteria that force independence in the Sarbanes-Oxley Law. Concentration of fees in a client. Relationship with owners, directors and executives of the audited entity. Consideration of the economic connection of the auditors (shareholders, investors) with the audited entity and / or with the owners and / or executives. View of the auditor as a Businessman or Entrepreneur and the contrast as an auditor. of the auditor with legal services as a joint professional offer under the leadership of the Independent Auditor. Tax services and their impact on the auditor's independence.
Incidence of globalization in the identification, evaluation and management of corporate risks through internal auditing. many aspects related to markets and the impact this has on the operational and administrative development of companies.
- Globalization is a reality in most countries of the world and in companies listed on the public stock market, those of the financial sector, those of the public services sector, among others, must take into account, in addition to international standards,
- By virtue of this, it is required, in addition to planning everything related to the tasks of the Audit, the evaluation of the risks that are run as a consequence of the application of the aspects derived from globalization, since it goes beyond the merely institutional and The corporate risks are a natural part of the process, but the systematization of such risks by the Internal Audit makes possible their: identification, evaluation and administration. Its impact, risk controls, risk analysis methodology, cost-benefit in establishing risk controls, corporate factors in risk analysis.
The use of information technology to efficiently develop internal audit information.
The so important advances that are taking place in the computer science techniques have caused that the administrative processes improve. If those in charge of Auditing and Internal Control do not put this progress at your service, they will necessarily remain relegated and will not be able to offer any added value. Therefore, it is necessary to innovate and improve all the tools to execute the Internal Control Audit and be able to provide added value to those who contract this service.
Scope and Field of Application of the Operational Audit The operational audit involves:
- The period under review Examination and verification of information related to institutional performance Review and preparation of reports on resource management Analysis of key activities and processes, evaluation of information and control systems Verify the use of public resources in accordance with principles of efficiency, effectiveness, economy, efficiency, equity and excellence. Verify compliance with goals and objectives. Evaluate management.
Field of application: Public Sector, Private Sector, Social Sector.
goals
Provide all types of organizations with the information necessary to use this powerful tool in a manner consistent with their needs and installed capacity, in order to evaluate their behavior and derive the measures required to improve their performance.
Specific objectives:
- Establish the degree to which the entity and its servers have adequately fulfilled the duties and powers assigned to them. 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. Verify that the audited entity complies with regulations and other legal and technical provisions that are applicable to it, as well as with principles of economy, efficiency, effectiveness, effectiveness, equity, excellence and valuation of environmental costs, according to each case, and make appropriate recommendations for each one of the identified findings Strengthen the security system of all the resources of the organization Promote the legality, economy, efficiency, effectiveness, equity and excellence in organizations.Stimulate the adherence of the staff to the fulfillment of the objectives and policies of the entity. Improve the levels of productivity, competitiveness and quality of the entity. Facilitate the consolidation of a policy of quality control and productivity with a long-term vision.
Importance of Operational Audit
- Through the Operational Audit, it is possible to know the problems that hinder operational development and hinder the growth of the company. It is important for this discipline to assess the importance of the problems, find their causes and propose suitable solutions and implement them. The analysis and evaluation of both internal and external factors must be done systematically and comprehensively, covering the entire company. The Operational Audit serves to verify the capacity of the administration at all levels. It is a specialized service designed for the administration, which determines the points where there is a potential danger and, on the other hand, highlights the opportunities to improve, reduce costs, eliminate waste and unnecessary time losses, as well as evaluate the effectiveness of controls,Observe if the direction of the policies and objectives is followed at all levels and determine if the company is operating with the profits it should, among others.
Internal control
Control frameworks for evaluation
- Cadbury Great Britain of Internal Control in the World
- KING South AfricaCo. Co. CanadaCOSO Commitee Of Sponsoring Organizations of the Treadway CommissionVienot FrancePeters Netherlands
The COSO framework has been adopted in the USA, by the World Bank and other financial organizations throughout the world.
COSO Report on Internal Control
- The Treadway Commission Commission Sponsorship Organization Committee was established in 1985 to support the National Commission Against Fraud in Financial Reporting.
- It incorporated into a single structure the different approaches existing worldwide, generating consensus among business people, legislators, regulators, etc.
- Updated the practice of internal control and its design, implementation and evaluation processes.
The new approach is shown in SAS No. 78, which corrects the Statement on Auditing Standards No. 55 Evaluation of the Internal Control Structure in an Audit of Financial Statements.
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