Audits of financial statements (external)
It consists of the examination of the Financial Statements of a company or entity, by an independent professional - Registered Public Accountant -, with the purpose of issuing a report (opinion), with a technical opinion on them or on the reasonableness of the themselves.
The opinion of the External Auditor, in this case, is related to two aspects:
- The application of GAAP (Generally Accepted Accounting Principles) in the preparation of the Financial Statements. The uniformity in the application of accounting principles and standards. Also referring to aspects of valuation and exposure.
1.2.2. Internal audit: (according to the National Convention of Internal Auditors Nov. / 82). It is an independent evaluation function established in an organization for the review of its activities as a service to management.
It is a control that works by measuring and evaluating the reliability and efficiency of the entity's integral internal control system with a view to achieving its improvement.
The Institute of Internal Auditors (Inc-IIA) defines it as follows:
“Internal Audit is an independent evaluation function established within an organization, to examine and evaluate its activities as a service to the organization. The objective of internal audit is to support the members of the organization in the performance of their responsibilities. For this, the internal audit provides them with analysis, evaluations, recommendations, advice and information regarding the reviewed activities. "(Translation by the Mexican Institute of Internal Auditors - Authorized for reproduction by the IIA based in Florida USA)
1.2.3. Operational or operational management audit, comprehensive audit
It is the comprehensive examination of the management of an Entity or Company (or a part of them) with the purpose of evaluating the efficiency of the results, taking into account for this:
- The goals and objectives set The human, financial and material resources used The organization and coordination of said resources and the established controls.
For:
- determine defects and propose improvements determine the causes of deviations and propose corrections determine the origin of problems and propose solutions.
All this translates into a report where the recommendations are provided, the professional will provide the necessary collaboration to achieve that end.
The Operational or Comprehensive Audit is a comprehensive examination of a company or a part of it, in all its aspects and at all levels, to establish existing defects and indicate improvements. «Uniting and expanding definitions of well-known authors we can say that:
It is the comprehensive examination of the management of an entity, in all its aspects and at all its levels. Taking into consideration the human, material and economic elements used, their organization and the established controls, to achieve the goals and objectives with economy, efficiency and effectiveness.
The action seeks to determine the defects and propose improvements, establish the causes of the deviations and propose corrections, find the origin of the problems and propose solutions.
The auditor and the performance audit
His task is aimed at evaluating the results of the management in order to fulfill the goals and objectives of an organization, achieving a correct use of material, human and financial resources and that the acquisition of goods and services is made in quantity and quality. appropriate and according to the needs of the moment.
In order to carry out this function, the Auditor must have the ability to see the company or organization as a whole, which allows him to offer constructive suggestions and recommendations to improve overall productivity.
Obviously, the Auditor must expand the scope and depth of his task, as well as venture into very specific areas where it may be necessary for him to resort to specialists in other disciplines who collaborate with him to achieve the proposed objective.
In this sense, you must consider three fundamental aspects:
- Entity policy Administrative controls Results obtained.
a) Entity policy:
You must determine the existence of the same, the appropriateness and acceptableness of this policy (adjusted to the goals and objectives), the meaning of its instructions and / or action guidelines as a control element in operational areas. It will evaluate the effects that the absence of defined policies or the non-compliance with them may produce, as well as the recommendation for the application of the instructions or modification of the same.
b) Administrative controls, internal control
It will evaluate the existence and adequacy of administrative controls as such, and in support of the productivity objectives that Senior Management intends to achieve, the degree of compliance of the operational areas and the coordination of operations controls with the instructions and / or guidelines dictated by the organization.
Analysis and consequences of the effects of the absence of administrative or operational controls in non-traditional areas, producing recommendations for the adoption or modification of said controls.
c) Results obtained, achievement of goals
It will determine if the results obtained are adjusted to the principles of economy, efficiency and effectiveness. If they are adapted to the market situation or to the budgetary possibilities during the development of the activities.
The auditor cannot, in the development of a comprehensive audit, take static elements, he must analyze all the internal and external variables that led to the management of the company or body to obtain the result in a given period. In the case of the Public Administration, they will be the physical goals and productivity that must be achieved with the budget assigned to it.
2.2. Product of the auditor's task:
With the application of this criterion of Integral Audit the auditor is specified to look for facts. Its procedure is the diagnosis, and the final product of its work is the preparation of a REPORT to the Senior Management, indicating those important factors of problems or areas that may be hindering the Maximization of the organization's objectives.
It is a valuable service as it includes recommendations for its correction.
Corrective action can be carried out through a simple reassignment of functions or if the complexity of the case justifies it: the hiring of additional personnel, or specialists, the incorporation of new technology or requiring the services of a consultancy or Comprehensive Audit study.
Obviously, all the recommendations must have a support, be possible to apply, for which the auditor must evaluate different alternatives, trained personnel to implement them, implementation costs against expected results and other elements prior to producing his recommendation.
Ultimately, as a consequence of the comprehensive audit task, the company or agency has the possibility of introducing improvements, reducing costs, achieving economy, efficiency and effectiveness in management.
2.3. Difference between management audit, comprehensive-operational and internal audit: *
In the traditional concept, Internal Audit evaluates the tasks carried out in each area, determining whether the established internal standards are met, on more rigid guidelines and following the instructions of the senior management.
The Operational or Comprehensive Audit evaluates the entire management of an entity, measuring efficiency in all its aspects and at all its levels (even in Senior Management), not only establishing defects but also proposing improvements. It is usually carried out by an external auditor consultant, it can be carried out by an internal auditor, as long as they act as staff in a function delegated by the Senior Management and apply the criteria of the comprehensive audit.
The difference between a comprehensive audit and a traditional internal audit is based on a practical principle that involves the following question:
* Can the internal auditor of a company evaluate the management of the entity as a whole with total objectivity and broad criteria? O well
* What experience do you have of having carried out this analysis in other similar companies? or
* What knowledge do you have about the current situation of other companies?
On the other hand, you must have knowledge of different disciplines that allow you to cover all aspects.
Obviously, if the Internal Auditor has these attributes, he is in perfect conditions to face a Management Audit.
Today training courses offer professionals the ability to overcome the aforementioned restrictions.
