Name : Annisa Rahman Dhita

NIM : 20170420269

Class : IPAcc 2017

WEEK 4 : RESUME

“REPORTING INTERNAL AUDIT RESULT”

A. Purposes And Types Of Internal Audit Reports

Internal audit reports have a basic purpose to describe a planned and scheduled audit
and to communicate the results of that audit. Internal audit reports are generally critical and
tend to emphasize such matters as identified internal controls weaknesses. All internal audit
reports should always have four basic objectives and components:

1. Objectives, timing, and scope of the review. The audit report should summarize the high-
level objectives of the review, where the review took place, and the high-level scope of the
internal audit

2. Description of findings Based on the conditions observed and found during the review, the
audit report should describe the results of the audit

3. Suggestions for corrections. Audit reports should include recommendations, based on the
findings, for correcting the conditions and their causes

4. Documentation of plans and clarificatio of views of auditee. Depending on the report

format, this section is often a place where the auditee can formally file a response to the
internal audit findings and state plans for corrective actions in response to those audit
findings and recommendations.

There are four-step process of (1) why internal audit launched the review, (2) what
internal audit found to be wrong and why is it wrong, (3) what should be done to correct
matters, and (4) what will be done by the auditee forms the basis of virtually all internal audit
reports. Internal auditors should always keep these four steps in mind when drafting audit
reports and the separate audit findings that provide the basis for these audit reports.
B. Published Audit Reports

Audit report can take a variety of different formats and styles, ranging from Web-
based documents to hardcopy paper reports. An audit report is a formal report document
outlining internal audit’s concerns and recommendations following the four objectives
discussed previously. The significance of audit reporting has changed after SOX. With SOX,
audit committee members, and, of course, senior management are to receive full copies of all
audit reports. While it is their right to request summarized reports as well, they are still
responsible for receiving and understanding all reported audit findings. Internal control
findings must be clearly described in an internal audit report.

 Approaches to Published Audit Reports

The form and content of internal audit reports can vary widely. An audit report
covering a review of internal controls may appear different from a report on business
continuity controls or one on fraud investigation procedures. Formal audit reports should
cover a similar general format, starting with a cover page, a description of the work
performed, and then the internal audit findings and recommendations. Today, a report is
typically in a Web-based document that may never be formally printed. Title of report and
objectives of review. A brief, definitive title tells the reader what is contained in the audit
report and is also useful for various summary reports. Similarly, an audit report should have a
brief but clear statement of the review objectives.

Audit procedures performed. A brief paragraph describing the audit procedures

performed is often very helpful to the report reader. This information is particularly useful if
internal audit has performed some special testing procedures in order to arrive at its opinion.

Auditor’s opinion based on the results of the review. An internal audit report should
always have some fairly general assessment of the overall adequacy of the controls or other
concerns in the area reviewed.
 Audit reports with “encyclopedic” coverage. Some internal audit reports strive to
present a great deal of information about the activity area reviewed. Their objective is to
provide an in-depth reference source to the report reader.

Description of the audit procedures performed. Audit reports sometimes provide a

great deal of sometimes too much information about the audit procedures actually performed.
detailed issues involved.

A highly summarized report. Some internal audit departments release very

summarized reports that say only that internal audit has reviewed some topic area and usually
found no control exceptions of significance.

Focus on significan issues. The more common report format is one that focuses only
on “significant issues” that have potentially important bearings on internal controls
weaknesses, policies, and operational approaches.

 Elements of an Audit Report Finding

Auditors will encounter a large number and variety. Some may be relatively important
such as the discovery that significant numbers of vouchers submitted for payment lack proper
approval signatures. Good audit report findings should contain

 Statement of condition.
 What was found.
 Internal audit’s criteria for p resenting the finding.
 Effect of the reported finding.
 Cause or reason for the audit deviation.
 Internal audit’s recommendation.

 Balanced Audit Report Presentation Guidelines

To provide a level of balance, internal audit must sort through the various
positive and negative data gathered during the course of a review. Some techniques to
provide better audit report balance are:
  Provide audit reports with perspective.
 Report auditee accomplishments.
 Show planned actions.
 Report mitigating circumstances.
 Include the audit responses as part of the audit report.
 Improving audit report tonal quality.

C. Internal Audit Reporting Cycle

 Audit Report Preparation Steps

 Outline Audit Findings

 Prepare the First Draft Audit Report
 Discuss with Management
 Preparation of Final Audit Report Draft
 Audit Report Closing Conference
 Issue Final Report

D. Effective Internal Audit Communications Opportunities

Communications are an important element of every phase of internal audit’s activities.

These problems affect all steps in the communications process and include:

 Not giving proper consideration to the power relationships of message senders

and receivers. Communication with a line supervisor often is different from that with
a senior officer.
 Ignoring temporary emotional stress by either the sender or receiver. An audit
exit meeting often turns into a situation filled with conflict and stress unless the
internal audit communicator takes care to consider these potential emotional issues.
 Failing to properly evaluate the capacity of the recipient to receive and
understand the message. If internal audit encounters a severe control problem in a
technical area in the course of its work, those issues must be communicated properly.
 Use of words that can have multiple meanings or can convey unintended
meanings. We have discussed this concern when preparing audit reports, but this is
all the more critical in verbal communications.
 Undue haste in the transmission of messages that undermine clarity and/or
credibility. Messages often need to be communicated slowly so all parties will
understand.
 Perception that the sender wishes to satisfy personal needs, thus inducing
emotional resistance and blocks. Often others view internal auditors as people
having a personal agenda. Others quickly recognize this, and communication may
become blocked.
 Failure to build needed foundations for the core message and related bad timing.
Internal audit concerns are not effectively communicated when they are just thrown in
the lap of the auditee.
 Lack of clarity or conviction because of a reluctance to cause the receiver
dissatisfaction. While an internal auditor must build a case to describe a concern
convincingly, the auditor should never mince words to avoid describing a problem
situation but should always clearly communicate a control concern.
 Impact of nonverbal actions, such as tone of voice, facial expressions, and
manner of communication. For example, in some parts of the world, a crossed leg
with the sole of the foot pointing to the listener can be viewed as an extreme insult.
 Not giving consideration to the perceptions and related feelings of the recipient.
Auditors should try to understand how messages will be received and decoded by
their receivers.