SIA – 4 REPORTING
SIA 4 “Reporting”
lays down that the internal auditor’s report should ordinarily include certain
basic elements.
An illustrative layout is given below
:–
v Title;
v Addressee;
v Period
of coverage of the Report;
v Report
Distribution List;
v Opening
or introductory paragraph;
i.
Identification
of the processes/functions and items of financial statements audited; and
ii. a statement of the responsibility of the entity’s management and the responsibility of
the internal auditor;
v Objectives/Scope paragraph (describing the nature
of an internal audit):
i. a reference to the generally accepted audit procedures in India, as applicable;
ii.
a description of the engagement background and the methodology of the internal audit
together with procedures performed by the internal auditor; and
iii. a description of the population and the sampling
technique used.
v Executive Summary,
highlighting the key material issues, observations, control weaknesses and
exceptions;
v Observations, findings and
recommendations made by the internal auditor;
v Comments
from the local management;
v Action Taken Report –
Action taken/ not taken pursuant to the observations made in the previous
internal audit reports;
v Date
of the report;
v Place
of signature; and
v Internal
auditor’s signature with Membership Number.
Internal
auditor should take care of following while drafting internal audit report so
that the methodology and quality of internal audit report is highlighted to
audit committee and other stakeholders:
·
Using the right tone and language;
· Taking a positive approach, i.e., tone is not critical, judgmental or unbalanced;
·
Writing clearly and concisely;
·
Quality of findings in terms of materiality;
· Quality of recommendations in terms of impact so that they correct current
conditions and prevent future effects;
· Degree of risks covered by the internal audit plan;
· Root
cause analysis of findings which are being carried forward from previous internal audit reports;
· Rating
recommendations as high, medium and low in order to assist management in
assigning priorities. Sometimes, rating as satisfactory, needs improvement and
unsatisfactory is also used by internal auditors;
· Making report user friendly and streamlining contents to eliminate extraneous or
redundant information;
· Any organizational/ legal constraint or constraint imposed by
time and resources should be specified in the report;
· Articulating the findings of internal audit
and highlighting the risks impacting
the organisation.
It
is suggested that the following devices may be applied while drafting internal
audit report for easier reading:
Ø Summaries
Ø Headings
Ø Topic
Sentences
Ø Graphics
