This work is the product of an investigation carried out on the results of the audits carried out by the teams of a Central Level X, in a period that covers the five-year period 1995-2000.
The fundamental objective that we have set ourselves, is to achieve from the knowledge of our weaknesses, a better awareness of the need for internal control and contribute to greater efficiency and effectiveness in the results of the work, as well as being an objective, to be winning the necessary space in the understanding of the Audit activity, not only as a means of control, but as a necessary consulting body for our body and its institutions.
Based on the new concepts that are incorporated into the work of the audit, to see it, not only as a means of detecting deficiencies, violations or fraud, but as a means of consultation, clearly defines the scope and importance of our work., by adding value to it.
That is why we propose that you follow us in the analysis of this research and at the end, discuss its conclusions.
Introduction:
Audit: It is said in the simplest way, the process of accumulating and evaluating evidence, carried out by one or more independent and competent people, about the quantifiable information of a specific economic entity, with the purpose of determining and reporting on the degree of existing correspondence between the quantifiable information and the established criteria.
As a principle it should be clear that the audit is not a subdivision or a continuation of the field of accounting. The established accounting system includes the rules and requirements of authorized bodies and the practices accepted by companies. The process of gathering accounting information within the system and the preparation of financial statements constitutes the role of the accountant.
The audit is in charge of reviewing the financial statements, management policies, and specific related procedures that form the basis for obtaining sufficient evidence about the purpose of the review, in order to express a proportional opinion on all this.
Since the auditor evaluates the financial statements prepared within the limitations and restrictions of the accounting system, it is subject to the same limitations and restrictions, that is why it is affirmed that a reliable accounting, yields, reliable financial statements.
In any presentation of financial information, whether external or internal, or in the performance of internal control activities, individuals may be guilty of ignorance, personal influence, self-interest, negligence, or even dishonesty. The main objective of an audit is to eliminate any of these five causes, and that is why its prophylactic work follows.
The objective of an internal audit is to assist all members of the board of directors in relation to the fulfillment of their responsibilities, by providing them with pertinent analyzes, evaluations, recommendations and comments, regarding the activities they review.
Internal control: It is the organizational plan of all the methods and procedures that are relative and that are directly related mainly to the safeguarding of assets and the reliability of financial records.
If the internal accounting control system is adequate, the possibility that fraud or other errors exist, in any magnitude, is remote. Having confidence in the absence of fraud or errors in the information process, the auditor can spend time obtaining evidence in relation to the financial situation and the result of operations.
The analysis that we propose in this work is the result of applying the method of studying the weaknesses that, in our opinion, affect the progress and operation of internal control in any of our entities or institutions.
There may be other weaknesses that are not included in it, but undoubtedly according to the research we have done and the study of the results of the Audit work, which we present below are the most frequent and repeated.
For the investigation of this work we apply the SWOT matrix method and the analysis of the weaknesses that emerged. It was not applied to a particular entity, but to the general set of problems derived from the results of audits carried out in the last five years, and especially those that yielded results of Poor and Poor.
The first thing we must invariably place ourselves in is, in the question: What is the entity or institution's corporate purpose? And, from this analyze: its structure, work policy, style used by the administration, proposed goals and suitability of its managers.
The objectives we set ourselves:
- Achieve awareness of the need for effective internal control, based on the analysis of weaknesses
- Achieve the necessary space in the understanding of the auditor's work in its broadest sense
For this, the results of the qualified audits of D and M in the years 95 to 2000 were taken as a reference.
| Years | Audits
executed |
D | M | Of the real
% D and M |
| 95 | 35 | 25 | 6 | 88.5 |
| 96 | 32 | twenty | 7 | 84.3 |
| 97 | 32 | 2. 3 | 5 | 87.5 |
| 98 | 31 | 22 | 4 | 83.8 |
| 99 | 27 | 18 | 5 | 85.1 |
| 2000 | 2. 3 | fifteen | one | 70.0 |
Total executed 1995 - 2000: 180 audits
Of them D and M: 124 69% (five-year)
Analysis results
Weaknesses:
- The style of work of administrations is inefficient and does not demonstrate effectiveness.
- The structures are not in accordance with the objectives for which the institution was created, or are poorly defined. Poor or deficient management methods. Little or no systematic check of the work of the areas to be controlled. Lack of priority or underestimation in the recommendations and the work of auditor. Lack of qualified personnel or poor application of labor policy. Disregard or underestimation of senior managers. Ignorance or outdated legislation.
Threats:
- The superior authorities show special interest in protecting an institution, regardless of its deficiencies.
- The superior authorities show no special interest in enhancing the work of control, systems, and auditing. The current legislation, both internal and of the global and central organizations, or of the organization itself, does not arrive quickly enough or its update is unknown..The follow-up to be exercised on the audited or controlled institution, the plan of measures by the heads and higher entity, is not sufficient or does not exist.
Strengths:
- There is the will and the awareness of changes in work style and to be more efficient.
- As there is awareness of change, the current structures are analyzed. The work of comprehensive attention to cadres and their reserves is strengthened and special emphasis is placed on training and improvement. The organism's inspection apparatus is strengthened, as well as the economic areas and specialties that had been rejected were retaken. The work of the internal auditor was strengthened and prioritized. A plan of attention to the economic and administrative areas was approved and implemented. The activity of Audit and other areas. It updates and trains cadres and specialized personnel in the current legislation.
Opportunities:
- Make the most of a structural rearrangement based on the analyzes currently carried out.
- The current priority and attention to the economic, administrative and audit areas. The creation, operation and force that is exerting to the activity from the National Audit Office and its positive current and future projection. The attention that is being demanded compliance with the Audit Decree Law and all those resolutions, circulars and guidelines of the Executive Committee of the Council of Ministers to support the activity. The growing improvement and training of auditors and their stimulus plans. In our sector specifically, the priority and attention that the State is giving and its future development.
As the object of our work are the weaknesses supported in the rest of the aspects, I propose to value them:
"Weaknesses in the work environment that affect internal control"
Terms:
The specific conditions outlined below could indicate the presence of weaknesses in the internal control environment, which even when not covering them all, the auditor should consider:
- Administration work style.
- Organic structure of the institution or entity. Methods for assigning authority and responsibility. Follow-up and systematicity. Effectiveness of internal audit work. Labor policy. Control methods on compliance with established legislation and regulations.
Administration work style:
The administration's work style is reflected in internal controls and in the general operating environment in a given entity, taking into account this precept the weaknesses in this aspect can be reflected in:
- Lack of administration in internal controls and in the control environment where they operate.
- Show an aggressive or unreasonable attitude for decision-making or before the risks that arise, which can also be reflected from the accounting point of view.
- A strong and justifiable administration before the recommendations of the internal auditors, both in accounting, administrative control and other tasks. Slowness to respond to crisis situations in the economic, financial and administrative areas. Use and preparation of information imprecise or unreliable. Example: Balance sheets and financial statements, etc. Instability and lack of attention to personnel in the economic and administrative areas. Overvaluation or underestimation of the financial statements and the results they show and lack of objective analysis of them. Lack of clarity, honesty or speed during the exercise of the audit, due to lack of documentation, evasive answers or ignorance.
Organic structure of the institution:
When the organic structure is inappropriate and is not in accordance with the corporate purpose and the general and specific objectives for which it was created, it happens that it will not be able to respond to the complexities of its functions and operations, therefore:
- It inhibits the segregation of functions for which it was created.
- Prevents the start, registration and maintenance of operations and custody of assets. When changes in administrative structure occur, they may result from these organizational disorders. New changes in structure may cause operational responsibilities to not coincide with division of functions. Delegation of responsibility and authority is inappropriate. Lack of definition and understanding of authority exists at all levels of the organization. Incompetence or lack of experience of staff in economic and other areas, over whom The responsibility for the records of the operations falls. Lack of supervision and control of the work carried out. Excess workload. Procedures not established or inadequate. Activities directed and controlled by a single person.
Methods for assigning responsibility and authority
- When the structures of an institution are not adequate, it is difficult or impossible to assign the correct responsibilities and with it the delegation of authority, especially for those matters related to: objectives, goals and operational functions.
- It does not allow the correct description of the work of its specialists and the adequacy of the roles and responsibilities of each one.
Monitoring and systematicity.
These are conditions that can affect internal control, since they indicate weaknesses that by themselves directly affect the results and efficiency of work, among them we can point out:
- The administration is not sufficiently clear about the control that it must exercise in the execution of the different activities.
- The methods for administrative control are inadequate to investigate unforeseen or unusual situations and decide the appropriate actions to correct them. The administration lacks sufficient vision to ensure that the policy established for the development of work regarding accounting systems and internal control.Administration does not give due treatment to notifications made by inspectors and auditors, whether internal or external, including those derived from detected errors and deficiencies that may become serious Violations.The administration does not prepare a plan of measures, therefore there is no follow-up that should be derived from it.The plan of measures proposed by the administration is not complied with and it is not followed up and information on its compliance as established.
Effectiveness of the internal audit work. When it does not comply with the directives, rules and principles, it happens that:
- The process of exploring an audit engagement does not exist or is not deep enough to allow the internal auditor to focus on the proposed objectives.
- The proposed audits have not had the appropriate focus towards the most complex areas. The auditors are responsible for operational decision-making in order to control the work in the accounting or administrative areas subject to audit, contrary to their counterpart functions. The provisions of the resolutions, referring to the Auditing Standards that measure the work to be carried out, are strictly complied with. The supervision and review processes do not exist or are inappropriate, or the conclusions and the report are not reviewed. Audit programs and other evidence of the work carried out are incomplete and fail to support the results.
Labor policy.: When the regulations established in the selection of specialized personnel are not complied with, the following weaknesses can be assessed:
- Staff selection is inadequate.
- There are insufficient procedures to guarantee the access of new workers, promotions, transfers, etc. There are no or insufficient technical training and professional development programs. There is no clarity in the qualifier of the job and job content, as an obligation to access to a technical or administrative position. Workers do not know the procedures and regulations established for their areas or the institution. The work of technicians, specialists and others is not controlled by their respective intermediate managers, nor of these by the main administrative officials.
Control methods on compliance with laws and regulations. These weaknesses are frequent in current processes:
- The regulations, circulars, laws and statutory decrees, applicable to their activity and in force, are ignored by managers and specialists.
- There are no mechanisms of their own created that they use to self-assess and control their own difficulties.Managers neglect their reaction to cases of non-compliance or violations of the legislation identified, even when these are reflected in internal or external audits and stand out for being Repetitive.The administration is reluctant to provide the necessary evidence to evaluate the facts.The policies that are applied to promote compliance with the legislation are weak.
Conclusions:
In general, the work has sought to reflect, some of the problems detected that cause the lack of administrative ability to react quickly to deficiencies that can lead to impunity or serious violations that become crimes, if not tackled on time.
We do not intend with this to provoke disappointments or regrets, but simply to call for reflection and supported by these results, to chart a radical change in our way of thinking and acting and give auditors the opportunity to function not only as problem seekers and deficiencies, but to rely on them as consultants, counselors and staff who, due to their skill, capacity and knowledge, allow us to guarantee solid steps forward based on efficiency, effectiveness and economy.
Taking into account this conclusion we summarize as follows:
- The weaknesses analyzed have a solution, because the current opportunities favor it.
- It is necessary to obtain the support of the corresponding management levels and their participation.The auditor must assume his role in the challenges that are currently imposed on him, which add value to the work of the audit.
Recommendations:
- Propose to incorporate for improvement an emergent training plan for the managerial staff and officials on basic issues of control and use of the work of Audit and the auditor.
- Continue to give priority and special attention to the activity of Auditing and auditors based on their role as consultants and methodological advisors, which will result in the effort to add value to the work of the internal auditor. Guarantee the continuity and consistency of the improvement and training of the auditors and the prioritized attention to their work and their logistical assurance.
Bibliography.
Auditor's Manual
Various texts and other articles.
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