SIA - 4 "REPORTING"

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