The internal audit report

The Report constitutes the final stage of the Audit process, it contains all the detected findings and the documentary support to support the opinion issued. This Report is always written for third parties that constitute the clients, regardless of the type of Audit that is carried out, hence the importance attached to it and the requirements it must meet. This Chapter establishes criteria for their presentation.

Internal audit, defined by the Ministry of Audit and Control as:

“a systematic process, practiced by the auditors in accordance with established technical norms and procedures, consisting of obtaining and objectively evaluating the evidence on the claims contained in legal acts or events of a technical, economic, administrative and other nature, in order to determine the degree of correspondence between these statements, the current legal provisions and the established criteria. ” (one)

Internal Audit is one that is practiced as an instrument of the administration itself in charge of the independent assessment of its activities.

Therefore, it constitutes a strategic activity since, through its effective actions, it reduces losses, including: auditor's expenses, costs and unproductivity of the auditee. Your product is revealed through reports and recommendations.

Miranda considers the simplest definition "a report is an objective and impartial presentation of the facts." (two)

Essentially a Report is more or less an official document that presents the facts for the information of certain interested users. This summarizes research and analysis and the facts can lead to conclusions and Recommendations that represent a careful and considered opinion. For this reason, it requires careful and accurate presentation, since the information it provides may determine future action.

The facts must be exact and complete, easy to locate and they also need to be interpreted, because these reports must be clear, precise, timely and efficient in terms of the use of resources.

The managers to whom such reports are addressed have less time each day, or to put it another way, for the same amount of time, they have a greater demand for activities every day. In this situation, the internal auditors are in urgent need to be, as previously stated, clear, concise, timely and make the most of resources.

Meigs, on the importance of the auditor's report, expresses "the preparation of the audit report constitutes the last step of those necessary to complete the examination." (3) is "the expression of independent and expert opinion is the most important and valuable service provided by the audit profession." (4)

¿ How to achieve the aforementioned reasons ?

Radically changing the way of making and presenting observations and recommendations. There is no time or resources to devote to the preparation of tedious and long reports, as well as spending excessive amount of time reading and analyzing the reports by the managers or officials to whom they are directed.

Auditors should write their reports with the utmost care and consideration. The report is the only aspect of the auditor's work that is seen by the public, and this report is likely to judge the auditor's competence and derive his or her legal responsibility. By submitting the audit report, you are relying on an opinion backed by your recognized accounting and audit expertise, as well as having carried out the audit in accordance with the Generally Accepted Auditing Standards, as these provide broad criteria for writing reports.

The reports must be coupled: at the time of their design, to the design of the controls, inspections and working papers process, extracting the results and observations from the working papers, and they can be directly transferred to the Notes Notes (Summaries) and from these to the Report.

Now, what characteristics should these reports have ?

The report is based on the summaries of the topics and the Minutes of Notification of the Audit Results (partial) that are prepared and analyzed with the auditees, respectively, during the course of the audit.

Based on the guidelines of the group leader and what is available in his Internal Audit Organization, the auditor prepares during the course of the audit all the reports on each of the Topics, using for this purpose the Working papers that constitute the Notes, which must be prepared immediately after the analysis of the topic is concluded with the leaders and officials corresponding to the audited Unit, and from which they will take the proposal of the final report with the aspects to be considered in each topic.

The preparation of the final audit report is one of the most important and complex phases of the audit, therefore it requires extreme care in its preparation.

The auditor's capacity and ability to write the report are essential for the report to achieve its objectives and comply with the purposes of offering the elements that allow the reader to easily know the results of the work carried out by the auditors.

The writing style is very specific to each person, making it difficult to establish rigid parameters or rules on this; however it must:

• Avoid excessive repetition of words. Do not use acronyms or abbreviations that have not been previously declared; Unless they are well known, such as: MP, UM, MLP, etc. Do not use offensive or vulgar terms, Use common and widely used words, Write impersonally, Use punctuation marks properly, In the copy of the report that is filed in the audit file, should be indicated, next to each finding, the References of the Paper that originated said indication.

The Ministry of Audit and Control resolves "The Information Standards establish the criteria for the presentation of the reports prepared as a result of the Audit and Consulting services executed at any level." (5)

Form and content

Internal auditors must prepare written reports to communicate the results of each Audit and Consulting service provided in their organization.

The report should include:

• the objectives of the Internal Audit, its scope and methodology, clearly state the significant findings and conclusions; and declare that the Internal Audit was carried out in accordance with these standards. Written reports are necessary to:

1. communicate the results of the Internal Audit to the corresponding officers and officials of the levels of management empowered to do so; reduce the risk that the results will be misinterpreted; and facilitate follow-up to determine if appropriate corrective measures have been taken.

General format of the Audit reports and general content criteria.

Header

The report must contain, in its format, at least the following data:

• Name of the organization to which the:

  - Central Audit Unit belongs;

  - Internal Audit Unit;

  - the Internal Audit Group; or

  - The Internal Auditor. Work Order No.: To record the number of the order that authorizes the execution of the Audit. Entity: The code (if it has it), name and address is expressed. Subordinated to: The name of the body, organism, union, company, business group, etc., to which the entity is subordinated. Type of Audit: The service performed is classified, according to the fundamental objectives pursued. Start date: Date on which the Execution of the Audit.Date of completion: Date on which the execution of the Audit ends at the headquarters of the subject of the same.Responsible: Name of the internal auditor duly registered and acting as head of the Audit.After the data previously stated., the document is titled with the name of

Auditors must prepare written reports to communicate the results of each Audit and Consulting service provided in their organization.

The report should include:

• the objectives of the audit, its scope and methodology, clearly state the significant findings and conclusions; and declare that the audit was carried out in accordance with these standards.

Written reports are necessary to:

• communicate the results of the Audit to the corresponding leaders and officials of the levels of management empowered to do so; reduce the risk that the results will be misinterpreted; and facilitate follow-up to determine if appropriate corrective measures have been taken.

The general format of the audit reports and general content criteria must be uniform and must be met in all the audits that are carried out.

Due to its form and content it consists of:

The following is reported in this section of the report:

• a brief characterization of the audited organization referring to the main activities it carries out and other aspects that may be of interest; the objectives of the Audit, as well as the causes of non-compliance with any of the planned objectives; the scope should express the depth and coverage the work that has been done to meet the objectives, the statement in the report that the audit was conducted in accordance with these standards; if it is necessary to modify this declaration when the applicable standards have not been complied with, the internal auditor must modify the declaration to express a qualification, and include in the scope the causes of non-compliance in a clear, concise and understandable way; and the limitations in the scope may be related, among others, to situations such as the following:

1. impossibility of applying a certain procedure established in the designed work program, which is considered necessary or desirable; inadequate primary records of the information; accounting-economic-financial and other policies, not in accordance with current applicable legislation.

• The methodology must clearly explain the work programs designed, the techniques that have been used to carry out the required analyzes and obtain the necessary evidence to meet the objectives of the Audit; and the report is addressed to the highest level of management to which the internal auditor is subordinate.

Conclusions

The following general criteria should be taken into account in this section:

the conclusions are logical deductions based on the findings of the auditors; the strength of the auditors' conclusions depends on the persuasiveness of the evidence from the findings and the convincingness of the logic used to formulate those conclusions;

they should not constitute a repetition of what is stated in the Results section of the report itself, but rather a synthesis of the fundamental facts and situations found; taking care to include a fact or finding that has not been reflected in another section of the report;

in general, the fundamental causes that originated the error, irregularity or fraud raised must be reflected, as well as the direct and indirect consequences that may arise from these findings; and

the rating given is presented in accordance with the results of the Audit service performed. This rating must be as objective as possible, observing the procedure established in current legislation.

The Ministry of Audit and Control establishes “general criteria for the general qualification of the Internal Control System set forth in the report, which must correspond to the detailed analysis of the total of verified findings; it is not determined by the ones that are repeated the most, nor by average; but attending to the importance of these and their incidence in the fulfillment of the objectives of the Internal Control that are established in the current legislation; (6) referring to:

• reliability of the financial and other information it issues;

• efficiency and effectiveness in the operations and activities it carries out;

• compliance with the legal provisions that apply to it; and

• control of available resources (human, material and financial).

A rating is granted for the results achieved regarding internal control (accounting and administrative) and an additional one, when it comes to Management, Financial, Follow-up or Recurring audit.

The ratings given for the evaluation of internal control (accounting and administrative) are:

• Satisfactory

When all the established provisions are complied with and it is seen that the control environment is favorable.

There may be some accounting errors within the fiscal year pending adjustment, but they do not distort the entity's results.

• Acceptable

When the deficiencies found in internal control (accounting and administrative) are less serious and easily solved, or until now have not affected the control of resources and if any irregularity occurs, it would be easily detectable by the entity.

There may be accounting errors that correspond or not to the fiscal year, but they are not determined in the entity's results.

• Deficient

When there is violation of Elementary Principles of Legality and Generally Accepted Accounting, as well as control, that may affect the entity's resources; No serious irregularities are detected in the control of resources, but the conditions have been created for this to happen, or there are accounting errors and some delays in the recording of economic events, which determine the entity's results.

• Bad

When there are serious breaches of the principles of legality, control and procedures that may or have led to the commission of criminal acts with impunity.

There are violations of the Generally Accepted Accounting Principles, serious delays in the accounting record of economic events and accounting errors corresponding to the previous fiscal year, which have not been adjusted. All of this implies distortion of the entity's results.

These are granted according to the types of audit (Management, Financial, Special and Recurring or follow-up) and are as follows:

• Management

Evaluate the degree of compliance with the entity's goals and objectives, deciding whether it does so with Economy, Efficiency and Efficacy, applying the provisions of the Methodological Guide for conducting Management audits.

• Financial

Evaluate the reasonableness of the accounting and financial information expressed in the terms of:

Reasonable.- When there are some accounting errors within the fiscal year that are not determined in the entity's results and the accounting is a faithful reflection of the economic facts.

Reasonable with qualifications.- There are some delays in the recording of economic events and accounting errors that correspond or not to the fiscal year, but which are not determined in the entity's results.

Unreasonable.- Violations of the Generally Accepted Accounting principles and of the valuation and exposure standards, delays in the recording of economic events and accounting errors that determine the entity's results are detected.

Tracking or recurring

It should be noted that significant deficiencies affecting internal control or accounting quality, which are reiterated in a recurring audit, should be highlighted in the report and may lead to a "Poor or Bad" rating, even when they alone remain within the allowable range for a higher rating.

In this type of audit, regardless of the evaluation obtained, the auditor must express his opinion about the situation presented by the entity, in relation to the previous audit, this should be expressed in the following terms:

In advance.

In stagnation.

In reverse.

Results

The auditor should consider the following general criteria in this section:

• from the sufficient, competent and relevant evidence gathered by the internal auditor to meet the objectives of the audit, the group leader determines the most significant findings that should be included in the report; whenever possible, internal auditors should include information of the necessary background of the most significant findings, which contribute to a better understanding of the report, the comments in the report must be precise and organized; reflecting, whenever possible, the legal provisions that are not complied with. The indications are arranged according to the objectives of the Audit, taking care to group them by topics and, within these, in order of importance, not including indications related to events that are not duly verified and included in the working papers;All significant cases of non-compliance with laws, other provisions and internal control that were found during the execution of the Audit should be recorded, and the Audit findings should be quantified in all possible cases, not only those that due to their magnitude and importance are more meaningful. Likewise, the percentage that represents the sample of the universe of items or articles that make up the topic must be reflected in each case; and those tables that, due to their size, allow them to be included in the content of the report, in order to make the presentation of the report clearer. In cases where these are extensive, they must be presented as annexes to the report; in the cases of the Audit services,The result of the meeting of conclusions with the leaders and officials at the different levels at which they were held must be recorded. The following issues, among others, may also be included:

1. the important achievements of the administration, especially when the measures adopted in one area can be applied in others, when certain information cannot be disclosed, the nature of the information omitted and the reasons that justify its omission must be expressed; and when appropriate, the results of each topic are compared with those obtained in the previous Audit service, recognizing the significant achievements or setbacks, if this is the case.

recommendations

The criteria to take into account are:

• the auditors should include their recommendations in the report, based on the errors, irregularities or fraud detected during the Audit; the recommendations are more constructive when they are aimed at attacking the causes of the observed problems, they refer to specific actions and go addressed to those who must undertake these actions; It is necessary that the recommended measures are feasible and that their cost corresponds to the expected benefits.

Farewell

The following criteria must be taken into account:

• In the Audit services, the term must be entered to present the discrepancies with the content of the report, if they exist. The term that is entered must not exceed the period established in the current legislation; likewise, it must express the term to send the Plan of Measures, as well as inform the higher level of the situation presented by the deficiencies found during the execution of the service. The terms that are entered must not exceed the period established in the current legislation; when appropriate, a note of thanks should be presented to the leaders, officials and other workers for the collaboration provided in carrying out the Audit; and the names and surnames of the Internal Auditor, group chief, position, signature and number of the Registry of Auditors of the Republic of Cuba must be recorded.You should also record your half signature on each page of the report.

Annexes

The following criteria must be taken into account:

• The annexes that accompany the report are listed, when it is necessary to prepare these; And in cases where non-compliance with the law, other regulations, principles and established norms or any other actions or omissions that affect the good performance of the organization have been determined, the internal auditor must present a Statement of Administrative Responsibility, in accordance with the current legislation.

Form of presentation

Each section is made up of certain homogeneous information with the same purpose, either for identification or exposure, and for illustration, general presentation guidelines have been proposed.

• The report uses 8.5 ”x 11” sheets (white bond), in Arial 11 font printed on one side and one space; leaving two between paragraphs, or between these and the titles. All titles are capitalized and highlighted in “bold”, aligned to the left. Where necessary, plecas are used as indentation in the text of the Report. The sheets are numbered consecutively and bound on the left margin. The covers established for each type of Audit must be used. The tables in the report are in arial 9 and borderless. It must be signed only by the chief audit auditor, who must also record his half signature on each page of said Report. The report must not show in its content to whom it is addressed, for which reason it is prepared on a one-on-one basis,so that it can be sent accompanied by a letter addressed to the corresponding recipient. In the Act of Declaration of Administrative Responsibility the names of those responsible and each one of the events are listed, although they are repeated for some cases. In addition, the time in the position of each of them must be reflected, according to appointment or contract.

The quality of your presentation depends on:

• compliance with the program, the depth of the investigation, the recognition of the findings in the corresponding work papers, where the problems found in non-compliance with the procedure and their solution are clearly exposed, as well as the time control in correspondence with the planning made of the objectives set forth therein

Responsible: Group leader or acting Auditor

Risks:

1. That the working papers corresponding to Notes to the Report do not express reasonableness to support the significant findings by the results of the verifications. That the working papers corresponding to Notes to the Report do not express the results sufficiently clear, understandable and detailed. the objectives of the audit, its scope and methodology. Do not correctly assess the results presented, according to established legislation. Do not define responsibilities for non-compliances that affect the smooth running of the organization. Do not facilitate monitoring to determine if corrective measures are taken The content of the Report is not used in a timely manner by those responsible and interested parties.to discuss the results of the Report.

Controls:

In carrying out this sub-process, the Audit can be supervised at certain times:

a) During its elaboration, in which the memo notes of the Report and its corresponding findings can be observed before the examinations exposed in the working papers. This supervision is the most important and necessary of this stage, since in this phase, the fulfillment of the objectives, the scope of the tests, the constancy of the reviews, the results of the work carried out and the notes that must be included can still be determined. in the Report.

b) After its elaboration, and before the conclusion, allowing in time to assess the situation it presents: the work before the exposed results and their assessment, to the ordered entity.

c) After the process, and filed in the Audit file, and in which an immediate review is made for the benefit of the work, it must be verified:

• The quality of the presentation. Research depth The problems found and their solution. Control of the audit time.

Bibliographic references

1. Ministry of Audit and Control. Resolution 100. Internal Auditing Standards. Annex 1. Chapter 1. Cuba. 2004.

2. De Miranda, Antonio. Audit. Chapter XVIII. Reports. Editorial Pueblo and Education. Cuban Book Institute. Second edition. Havana. Cuba. 1974

3. Meigs, Walter B. Principle of Audit. The role of the Auditor. Chapter I. 1977.

4. Meigs, Walter B. Principle of Audit. Audit reports. Chapter 20.1977.

5. Ministry of Audit and Control. Resolution 100. Internal Auditing Standards. Annex 1. Chapter 4. Information standards. Cuba. 2004.

6. Ministry of Audit and Control. Resolution 289. Methodology for the Evaluation and Qualification of the Audits ”, Qualification System. Cuba. 2005

Bibliography Consulted

From Miranda, Antonio. Audit. Chapter XVIII. Reports. Editorial Pueblo and Education. Cuban Book Institute. Second edition. Havana. Cuba. 1974

Ministry of Audit and Control. Resolution 100. Internal Auditing Standards. Cuba. 2004.

Ministry of Audit and Control. Resolution 289. "Methodology for the Evaluation and Qualification of Audits", Cuba. 2004.

Planas Batista. Camila. Methodological procedure to harmonize National Auditing Standards with International Standards. Havana. Cuba. 2006.

Lefcovich.Mauricio. Internal audit. A systemic approach and continuous improvement. www.monografias.com - 2003.