INVESTMENTS AUDIT WORK PROGRAM

PROJECT TEAM (LIST MEMBERS)

Project Timing Date Comments

Planning

Fieldwork

Report Issuance (Local)

Report Issuance (Worldwide)

AUDIT OBJECTIVES

Objective Comments Initials

Time Audit Step Initials WP Ref

Administration

Planning

Discuss the nature and scope of the audit with key ABC
personnel.

Discuss timing with key management.

Schedule timing with the auditee.

Finalize the audit program.

Schedule staffing as appropriate.

Reporting

Create a summary scorecard for each reviewed process.

Using the standard report template, create the internal audit report
(including a compilation of findings resulting from the work
performed).

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Hold a closing meeting with key company management to review

draft internal audit reports and findings.

Publish a final report and distribute it.

Other Administrative

Compile test work and key support data into a work paper binder.
Include a binder index of key information.

Include a final budget vs. actual (BVA) summary for the job in the
work paper binder.

Include a copy of the final report in the work paper binder.

Discuss job economics with the internal audit manager, as

necessary.

Follow up on satisfaction surveys.

Submit a report to the internal audit report database.

File work papers in the internal audit file room.

Preliminary Field Work

Identify key contacts for audit areas.

Obtain and document an understanding of the overall operating

organization structure. Consider the following areas:
• Personnel: Organization charts, total number of personnel,
divisions, job descriptions, etc.
• Transactions: The volume/value of various transaction types
processed.
• Systems: Application modules, interfaces, tracking systems
and related management reporting.
• “Customers”: Who are the key external and internal customers
for the process?

Obtain electronic copies of relevant files as considered necessary

to facilitate testing and process analyses.

Detailed Audit Procedures

Understand the Process

Conduct interviews with key individuals to gain an understanding

of the process.

Create process maps to visualize the flow of information and to

identify key points of control and risk.

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Review all relevant written departmental policies and

procedures/goals and objectives.

Evaluate the current practice against known best practices.

Interview key management in the department to gain an

understanding of the workflow within each area. Document the
discussion.

No. Description of Test Procedures

A • ICW controls are tested.

• Verify the existence of formal investment policies and review
them. Verify that specific approval limits were defined
throughout all processes (acquisition, disposition and
reconstruction).

• Obtain a list of communities acquired in the testing period.

• Select a sample of the newly acquired communities and obtain
their related market and investment analyses, pro formas,
estimated budgets, and management investment committee
(MIC) minutes indicating approval for the purchase of the
community.
• Review market and investment analyses to determine that they
were complete and presented to the MIC for approval.
• Review pro formas and estimated budgets for ongoing
acquisitions to determine whether they were completed for
initial approval and updated for significant, subsequent change.
If necessary, verify that subsequent approval was obtained.
• Document the test results.

• Obtain the disposition plan for the fiscal year 20xx.

• Ensure that a disposition plan has been formulated for the
fiscal year 20xx, along with the relevant financial analysis.
• Verify the approval of the plan by the MIC and investment
funding committee (IFC).
• Verify that the VP of investments (VPI) prepared an adequate
analysis of the candidates identified.
• Document the test results.

• Obtain a list of all communities in redevelopment.

• Select a sample of the communities and obtain the related
redevelopment packages.
• Ensure that the selected redevelopment packages are properly
completed and include all necessary documentation and
analysis.
• Foot and recalculate all schedules and analyses to ensure
clerical accuracy.
• Verify that these redevelopment packages have been

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approved by the MIC.

• Document the test results.

• Obtain a list of communities in the process of being acquired.

• Select a sample of the communities and obtain their due
diligence request forms.
• Obtain the 20xx capital budget and property description
schedule as reviewed by the VP and senior VP of investments.
• Verify that due diligence teams were appointed for acquisitions,
with the appropriate department represented (Marketing,
Residential Services and Capital Expenditures).
• Verify that the policy is being followed in relation to acquisition
procedures, including verifying that specific due diligence
procedures were completed by reviewing the due diligence
form and board package.
• Ensure that the capital budget and property description
schedules were reviewed by the VP and senior VP of
investments.
• Foot and recalculate the capital budget to ensure clerical
accuracy.
• Document the test results.

• Select a sample of dispositions and obtain the relevant

financial analysis (gains or losses calculation) compiled by
property accounting.
• Foot and recalculate the financial analysis to ensure clerical
accuracy.
• Vouch the financial analysis applicable to support to ensure
that the calculation was properly completed.
• Trace the financial analysis to the general ledger to ensure that
the gains or losses were properly posted to the general ledger.
• Select a sample of acquisitions and obtain the relevant yield
matrix and pro forma financial statements as prepared by the
investments group.
• Foot and recalculate the yield matrix and pro forma financial
statements to ensure clerical accuracy.
• Vouch the yield matrix and pro formas to applicable support to
ensure that the calculations were properly completed.
• Document the test results.

• Obtain a list of all acquisition closing entries.

• Select a sample of the closing entries.
• Examine the selected closing entries for acquisitions to ensure
that amounts for federally-facilitated exchanges (FFE), land
and building have been allocated properly and adhere to the
policy.
• Ensure that entries were reviewed and approved by the

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property controller.
• Document the test results.

• Obtain a list of all investment-related journal entries posted in

the reporting system.
• Select a sample of the population.
• Examine investment-related journal entries created in the
system and verify that they have been reviewed and approved
by the property controller.
• Examine investment-related journal entries created in the
system and verify that they have been reviewed and approved
by the construction controller.
• Obtain and verify the evidence of personnel-access reviews
and modifications made as necessary.
• Verify the use of corporate closing financial statement
checklists for construction.
• Document the test results.

• Obtain board packages for communities sampled in the test.

• Ensure that the proper level of management has signed off on
acquisition/redevelopment projects.
• Document the test results.

• Using the acquisition listing obtained in the testing, select a

sample of acquired communities and obtain the acquisition
settlement statements.
• Examine each sampled settlement statement for fixed asset
additions and verify entry into the system and evidence of the
property controller’s approval.
• Verify that policies and procedures are in place with regards to
capitalization and fixed assets for the property accounting
group and followed for transactions tested.
• Document the test results.

• Obtain a list of dispositions.

• Select a sample of disposed communities and verify that MIC
approval was obtained for the disposition.
• Document the test results.

• Obtain a list of policies and procedures related to capitalization

and fixed assets with the last revision date.
• Obtain investment policies and procedures in conjunction with
the entity-level assessment performed by management.
• Ensure that policies exist and make inquiries of management
to ensure that policies are followed.
• Review revision dates of all policies to ensure that policies are

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current.
• Document the test results.

• Observe a Lotus Notes user other than the SVP, VPI or

investment manager’s attempt to alter Lotus Notes forms
without being given editor access to those forms. Include the
P&S agreement, the letter of interest, letter of intent and the
broker-buyer agreement.
• Document the test results.
Note: Changes to the systems are further tested during IT change
management testing.

• Obtain a current system access listing.

• Review the system access listing to verify that only the
Business Services Group (BSG or IT) has the ability to set up
new communities in the system.
• Document the test results.

• Obtain a copy of written investment policies and investment

committee parameters.
• Obtain copies of final Purchase & Sales agreements for the
selected acquisition.
• Ensure that P&S has been properly approved by the proper
parties in accordance with company policy.

• Obtain the last three months of monthly impairment reviews

from the controller and verify management’s review.
• Verify evidence of the controller’s quarterly review of all
properties.

For the item(s) selected:

• Obtain a client-prepared market analysis for the property.
• Verify that the market analysis performed was presented to the
board of trustees (BOT) as part of the proposed acquisition
book by reviewing the relevant minutes of the BOT meeting.
• Document the test results.

For the item(s) selected:

• Ensure that a detail of the leases existing on the acquired
property is reviewed by the acquisitions department.
• Ensure that the lease term as reviewed by the acquisitions
department agrees to the FAS 141 analysis and the purchase
and sale details obligations assumed by either the seller or
buyer.

• Obtain a list of all property disposals that occurred during the

testing period.
• Obtain copies of letters of intent for each disposed property.

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• Ensure that proper signatures are on the letters of intent.

• Obtain copies of purchase/sales agreements for verification of
accurate selling price in comparison to the current market
value.

For item(s) selected:

• Obtain a copy of a memo prepared by the CEO or EVP
detailing allocation of acquisition cost between land and
building.
• Ensure that the memo is signed as evidence of review by the
CEO and EVP.
• Verify that the memo can be tied back to the market and
financial analysis of the properties.
• Obtain a copy of the settlement sheet for settlements that
occurred during the testing period and verify that the sheet can
be tied back to the financials.

• Obtain a list of any property dispositions processed during the

testing period.
• For all properties listed, obtain a spreadsheet calculating
gains/losses on disposition.
• Ensure that the spreadsheet is signed as evidence of review by
the SVP of accounting.
• Obtain original entries made by the controller and recalculate
them for accuracy. Verify proper approvals on the entries and
tie the entries to the GL.

For the item(s) selected:

• Obtain copies of settlement statements.
• Ensure that each statement is signed as evidence of review by
the EVP real estate.
• Document the test results.
• Maintain a copy of the settlement statement for work papers.

• Obtain a list of all properties that have met the six GAAP
requirements to be available-for-sale (AFS) during the testing
period.
• With the help of the controller, view the properties listed and
ensure that they are uniquely identified as having met all six
GAAP requirements.
• Obtain documentation of the analysis used to make sure the
properties have met all six GAAP requirements.
• Verify that properties that are currently available for sale do not
have a depreciation expense on the books.
• Verify that all asset disposals are properly approved per
company policy.
• Make sure that depreciation stopped the date assets were

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identified to be AFS on a sample of new AFS.

• Refer to testing the GAAP checklist and the disclosures as part

of the financial reporting process.

For the item(s) selected:

• Obtain fund transfer confirmations made during the testing
period.
• Obtain a current copy of the general ledger and ensure that
released funds were recorded appropriately (might be in the
corporate general ledger suspense account prior to settlement
and then the proper land and building accounts at settlement).
• Obtain the previous month’s suspense account reconciliation
and review it to make sure that it was complete.
• Verify the accuracy of the allocating expense entries made by
the controller to the land and building accounts.

For the item(s) selected:

• Verify that the acquisition checklist was used, indicating
completion of all applicable steps, and signed off by the
reviewer.
• Ensure that fair value calculation was prepared and obtain
supporting documentation on rate and assumed liabilities.

• Work with IT and verify that the access noted per the control
description is the actual access granted.
• Document the test results.

For the item(s) selected:

• Obtain FAS 141 valuation spreadsheet(s).
• Test the mathematical accuracy of the spreadsheet(s).
• Ensure that spreadsheet(s) are signed as evidence of review
by the EVP.

• For dispositions selected for testing, obtain the analysis of

gains recorded.
• Obtain evidence of the SVP's review of the analysis.
• Ensure that the analysis specifically addresses gains
recognition in accordance with FASB 66 and other
applications.

B • Look at the last three months’ month-end financials and verify

that the property controller signed off on them.
• Look for evidence of review for large variances (greater than
$5k). Look for adequate explanations of large variances.
• Document the test results.

• Look at the last three months of construction packages to verify

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that the controller completed a high-level review.

• Make sure that the changes captured were reversed the next
month in the system.
• Document the test results.

• Look for evidence of client team meetings (e.g., minutes kept).

• Review the memos from the most recent meeting issued by the
acquisitions officer and client team.

• Verify that all contracts executed in the testing period are done
properly.

• Verify that the acquisition officer signed off on all final closing
statements for acquisitions made in the last six months.

• Verify that the portfolio controller reviewed the analysis.

• Recalculate the report for accuracy.
• Verify that the SFAS model is reasonable.

• Verify the completeness of the disposition plan and property

analysis of all current potential dispositions.
• Compare the analysis to the company's desired performance
levels, ROI and vacancy levels.
• Verify that notification was made at the time the property was
identified for disposition and the FAS 144 process was started.

• Verify that yield matrices for properties being currently valuated

are completed and accurate. Ensure that they are in line with
established company targets.

• Verify that inspections were complete for 20% of the

communities acquired in the current year. Ensure that the
checklist is properly approved and filed.

• Inquire about the outsourcing hiring process. Confirm that three

bids were taken from reputable companies.
• Inquire about the selection process. (What were the factors
used in awarding the bid?)
• Verify the closing checklist for all acquisitions over the past
year for completeness and approvals.

• Search the company website to verify that policies and

investment criteria related to the acquisition exist, such as
geographic area, product type, retail centers, etc.
• Test a sample of purchases to ensure that they are in line with
these criteria.

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