KPMG International - KPMG Global
0341630Specimen internal audit plan00Specimen internal audit planAppendix 13Internal audit provides independent, objective assurance over an organisation’s risk management, internal control, governance and the processes in place for ensuring effectiveness, efficiency and economy.Each audit plan will be different and tailored to the organisation’s needs. However, there are common elements that the audit committee should expect to see when reviewing the audit plan, albeit in practice these elements might be presented in many different ways. These elements are discussed below.Overview of the audit approachThe audit committee should expect the audit planning document to set out that the audit plan has been developed by:taking account of the risks identified by the organisation in its risk register and other documents;using the internal auditor’s experience of the organisation and the sector more generally to identify other areas of risk which may warrant attention; anddiscussing all identified risks and other relevant issues with the organisation’s management to identify the potential scope of internal audit.Risk-focused internal audit coverageWhere the organisation’s risk management policy allocates each risk a likelihood and impact rating between ‘high’ and ‘low’, the audit plan might for example focus on ‘high’ and ‘medium’ priority risks over (say) a three-year period. However the internal audit is focused, the audit committee should be fully informed of:which areas are being addressed;how many audit days have been allocated to each area;when the fieldwork is being undertaken; andwhen the internal auditors will report their findings.Exhibit 1 (below) illustrates which risks identified by the organisation in the risk register are addressed by the internal audit plan. Exhibit 2 puts these risks in the context of a three-year audit plan. It is also useful to keep the audit committee apprised of the risks that are not addressed by the internal audit plan – see Exhibit 3.Other reviewsThe internal audit strategy may address some ad hoc areas that do not feature as a high or medium risk. These are nevertheless areas where the organisation would benefit from an internal audit review, or they are being reviewed to provide assurance to the audit committee and external auditors regarding operation of the key financial and management information systems. The audit days, fieldwork and reporting expectations for these areas should also be identified in the audit plan.ContingenciesIt is important to adopt a flexible approach in allocating internal audit resources, in order to accommodate any unforeseen audit needs. The audit plan should give an indication as to how many ‘man days’ have been allowed for contingencies.Follow-upFor internal audit to be as effective as possible, its recommendations need to be implemented. Specific resources should be included within the plan to provide assurance to the organisation and the audit committee that agreed audit recommendations have been actioned effectively and on a timely basis.Planning, reporting and liaisonThe audit committee should expect the internal audit plan to identify a number of audit days relating to the following:quality control review by manager;production of reports, including the strategic plan and annual internal audit report;attendance at audit committee meetings;regular contact with the organisation’s management;liaison with external audit; andinternal quality assurance reviews.The internal audit teamWhere the internal audit is outsourced, the audit committee (and management) should expect a brief introduction to the key individuals working on the audit. This might include partners, managers and any specialist advisers.TimingThe audit plan should set out the timing of the fieldwork and confirm the form and timeliness of reports to management and the audit committee. For example:a report for each area of work undertaken within X days of finishing the fieldwork;a progress report for each audit committee meeting; andan annual report on internal audit coverage to the audit committee (reporting to fit in with the committee meeting dates).Exhibit 4 outlines how the timing might be presented for an internal audit carried out in three phases to coincide with the audit committee timetable.Internal audit performance indicatorsThe internal auditor might propose a series of performance indicators against which management and the audit committee can measure the function’s performance. An example of proposed indicators is included as Exhibit 5.Exhibit 1: Internal audit plan – focus on the organisation’s key risksRisk identified in the risk registerRankingInternal audit reviews over a three-year period1. Failure of the new finance systemHighFinance system implementation2. Reliance on small number of specialised staffHighIT3. Cyber security issuesHighIT4. Ineffective project assessment proceduresMediumContract management5. Non-performance of contractsMediumContract management/departmental reviews6. Poor procurement of projectsMediumEstates7. Failure to protect intellectual propertyMediumIntellectual property management8. Statutory non-compliance (H&S)MediumHealth and safety9. Non-prevention of foreseeable accidentsMediumHealth and safety10. Failure to adequately manage occupational stressMediumHuman resources11. Failure to attract and retain high- quality staffMediumHuman resources12. Non-financial control failureMediumKey financial systems/department reviews13. Fraud, theft and misuse of assetsMediumKey financial systems/department reviews14. Breach of financial memorandumMediumKey financial systems – treasury management15. Reputation unclear or fragmentedMediumStrategic planning16. Ineffective faculty business planningMediumStrategic planning/department reviews17. Failure to consider future strategiesMediumStrategic planning18. Claw back of project fundingLow*Contract management/departmental reviews19. Unsatisfactory procurement proceduresLow*Key financial systems – purchasing* Although categorised as a ‘low’ risk, this will be covered within a review of higher risks.Exhibit 2:Three-year rolling planInternal audit reviewsCurrent yearYear 2Year 3Total daysRisk based reviewsa. Contract management--1515b. Departmental reviews-252045c. Estates--1515d. Finance system implementation5050e. Key financial systems-252550f. Health and safety15--15g. Human resources15--15h. Intellectual property management15--15i. IT systems20151550j. Strategic planning20--20Total risk-based days1356590290Other reviewsk. Risk management108826l. Corporate governance-7-7m. Corporate structures--2222n. Costing processes-15-15o. Sickness management-15-15Total other review days10453085Otherp. Contingency88824q. Follow-up88824r. Planning, reporting and liaison349952Total other days502525100Total days195135145475Exhibit 3: Risks not subject to internal audit reviewRiskRanking20. Defamation/professional negligenceMedium21. Necessity for redundanciesMedium22. Influential connections lostMedium23. Failure to prevent a major incidentMedium24. Failure to adopt equal pay provisionsMedium25. Failure to prevent dismissalsMedium26. Missed commercial opportunitiesLow27. Failure to adequately manage disability issueLow28. Failure to prevent major health incidentLow29. Statutory non-compliance – servicesLow30. Failure to prevent outbreak of food poisoningLow31. Exposure to higher interest ratesLowExhibit 4: Annual planInternal audit reviewsCurrent yearPhaseFieldworkReport to auditcommitteeRisk-based reviewsd. Finance system implementation50All phasesAll audit visitsFeb/May/Oct meetinge. Health and safety15Phase 2w/c 26.02.20xx31.05.20xxf. Human resources15Phase 1w/c 20.11.20xx08.02.20xxg. Intellectual property management15Phase 2w/c 26.02.20xx31.05.20xxh. IT systems20Phase 1w/c 20.11.20xx08.02.20xxi. Strategic planning20Phase 1w/c 20.11.20xx08.02.20xxTotal risk-based days135Other reviewsj. Risk management10Phase 2w/c 26.02.20xx31.05.20xxTotal other review days10Otherq. Contingency8r. Follow-up8Phase 3w/c 14.05.20xx09.10.20xxs. Planning, reporting and liaison34Total other days50Total days195Exhibit 5: Performance indicatorsPerformance indicatorTargetPercentage of audit work delivered by qualified staff60%Operational plan to be submitted by September each yearSeptember of each yearFollow-ups to be performed within 1 year of the audit taking placeWithin 1 year of assignmentsIssue of draft reports within 30 days of work being completed30 working daysIssue of final report within 10 working days of receipt of management responses10 working daysRecommendations made compared with recommendations accepted80%Internal audit attendance at audit committee meetings100%Issue of internal audit annual reportSeptember of each year ................
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