INTERNAL

AUDIT
PROCESS
Jacob has recently been hired as an intern in your internal
audit department. He is very keen to learn the ropes of
internal audit.

Your manager paired you up with him to audit the “tender

and medical scheme”.

One of your objectives is to train Jacob on the internal audit

process after which he is required to write a report.
STEP 1: ANNUAL AUDIT PLAN
At the beginning of every year the Internal Audit Manager
prepares an audit plan indicating the areas to be audited
during the year.

This plan is approved by the Board Audit Committee and

tracked during quarterly meetings.

Factors to consider when drafting an audit plan

1. Key Risks mapped out in risk register
2. Key Board & Management concerns
3. External Audit Management letter
4. Resources available (tools & Staff)
5. Legal and regulatory requirements
STEP 2: NOTIFY AUDITEES
At the beginning of each audit (other than surprise spot
checks), auditees are informed of upcoming audits via email
or telephone call.
The notification includes:-
- Section to be audited
- Invitation to entry meeting
- Audit period
- Audit Scope & Objectives
STEP 3: PREPARE AUDIT PROGRAM
An audit program documents the procedures the internal
auditor will follow to execute the audit. The audit program
describes; the quantity and quality of evidence to be
collected, how the evidence will be collected and analysed,
and materiality level.

The audit program is not static and may be adjusted

depending on changing objectives or evidence gathered.

The audit program helps in the allocation of work and

accountability of the audit team.

As part of preparing the audit program relevant policies

and procedures are reviewed
STEP 4: ENTRY MEETING The auditor will hold an audit entry
meeting as part of audit process to
formally commence the audit.
During the entry meeting the
following will be discussed. Minutes
of this meeting are recorded as part
of audit process.

- Audit Objective
- Audit Scope
- Audit timelines
- Audit team
- Audit information required
STEP 5: FIELD WORK
The auditor gathers evidence as per the audit plan and
documents in the audit working papers.

Ways of gathering audit evidence are:-

o Interviews
o Data Analytics
o Walkthroughs
o Physical verification
o Recalculation
o Reperformance
o Observation
o Physical verification

During fieldwork, the auditor should maintain an open line

of communication i.e. communicate significant findings to
auditees immediately, and communicate challenges.
STEP 6: DRAFT AUDIT REPORT
At the end of fieldwork the auditor prepares a draft
report
It is prepared before the exit meeting to give the auditee
time to prepare responses and clarify audit findings
raised.
A Sample report format is:-
STEP 7: EXIT MEETING
The auditor and the auditee will hold a meeting to
discuss the draft audit report.

The auditee will be required to provide evidence to

refute any claims in the audit report

Corrective actions, persons responsible, and

timelines are agreed upon during this meeting.
(Depending on the complexity of the audit there may
be a series of exit meetings to comprehensively
close on the audit)

Minutes of this meeting are taken as part of the

audit process
STEP 8: FINAL AUDIT REPORT
After the exit meeting the auditor will prepare a final
audit report containing the agreed corrective action
and implementation timeline

The report is sent to the people in the distribution

list with a forwarding letter.

Any new risks identified are also updated in the risk

register.
STEP 9: AUDIT FOLLOW UP

Audit reports are only as good as the

implementation of recommendations.

Great audit reports put on the back shelf

without implementation cause organizations
to lose money

Auditors should therefore follow up

implementation of recommendations and
escalate any delays observed.