Introduction
Every organization usually operates with the objective of maximizing profits while minimizing costs. These objectives are sometimes affected negatively by the various risks and threats affecting the firm. In order to realize these objectives, internal auditing is relevant and important. Abu Dhabi Water and Electricity Authority (ADWEA) is an organization that provides water and electricity necessities to the Abu Dhabi residents (ADWEA 1). The firm has been in operation for a long time.
The management of the organization would like to improve the delivery of the services of the firm as well as improve its performance. For this to happen, it is necessary that the organization ensure that it observes set guidelines regarding internal auditing. These guidelines of pre-assessment and internal auditing procedures for the company will be examined in this paper.
Pre-Assessment Audit Procedures
Before an organization undertakes a full audit of its activities and resources, it is important that an audit pre-assessment be undertaken. The pre-assessment ensures that the firm is ready to undertake the internal audit. The process also helps the organization identify anything that does not conform to the auditing process and corrective measures taken in time. The pre-assessment procedure begins with the management approaching the relevant auditing organization for the pre-assessment exercise (Woodside 91).
On the day of pre-assessment, the auditor will come to ADWEA and conducts an in depth review of the compliance of the company procedures with the required standards. The pre-assessment audit report should include any nonconformity for action. The report should be provided to the management of ADWEA. If the nonconformities are many, the auditor may recommend the postponement of the internal auditing exercise to a later date in order to allow time for rectification. However, the recommendation is made only if more than three nonconformities are discovered. Minor nonconformities may not affect the set date of internal audit.
Internal Audit Procedures
According to Switzer, the role of the independent internal audit conducted in the ADWEA is to ensure that the risk management process of the firm is operating effectively (75). Internal auditors of the organization conduct the process of internal auditing. These auditors look beyond financial risks and statements and consider wider issues affecting the organization such as the growth prospects of the authority, the reputation, environmental impacts and employee treatment. The internal audit of the authority requires no special resources. The management is expected to provide necessary assistance to the internal auditors conducting the internal audit. The internal audit process of ADWEA involves the following procedures.
To begin with, the process requires maximum independence for its success. In order to achieve the required independence of the internal auditing process, the organization needs to set up appropriate objectives of reporting lines and procedures. Through the internal auditing process, the internal auditors will review many processes of ADWEA. Therefore, it is important that internal auditors be provided with full access to the records of the ADWEA. The access required is for the financial records of the firm, assets and other information regarding the performance of the company. The authority may deny them access to personal information as provided in the privacy act. According to Woodside, internal auditors should treat the information provided by the ADWEA to the internal auditors with strictest confidence (98).
The internal audit procedure may include review of the activities of the authority where the firm. This may go beyond the financial reports of the organization in order to gain a full understanding of the operations of the organization. They may include:
Financial information: the internal auditors of ADWEA are interested in the integrity and reliability of the financial records of the company. The auditors will evaluate the manner in which the company utilizes its financial resources. The required reliability and integrity will be revealed by the accountability of the reports. Moreover, the completion, accuracy and timely completion of the records positively contributes towards favorable internal audit findings (IRS 1).
Projects: the auditors will also review the major project undertaken by the organization. Internal audit of the project may help the project teams to advise on the systems development issues affecting their service and product delivery (Switzer 86).
Economic and efficient use of resources: the internal auditors in ADWEA will undertake an audit of all resources of the firm to determine effectiveness in their use. The management of the ADWEA has a responsibility of ensuring that resources of the organization are utilized efficiently. The internal audit will be conducted in line with the set principles to ensure efficient use of resources.
In addition to the above, the internal audit will include the examination of request made by the top management of the firm. This may include special reviews requested by the management such as examination of specific supply of water and electricity to specific locations. The internal auditors will have authority to provide audit report on all activities of ADWEA.
After completing the internal audit, the internal auditor will provide a report containing necessary recommendations to the audit committee of the company. The auditor shall discuss the report with the organization management. The internal audit should be conducted according to the set codes of ethics. The findings should incorporate the responses of the management and they should be in a manner that can be easily read. Caution should always be undertaken to ensure that the audit is independent (Woodside 106).
Conclusion
This paper has outlined the internal audit procedures that are to be followed by the internal auditors of ADWEA. Before an internal audit is undertaken, there is need for conducting a pre-assessment audit. The pre-assessment is vital for determination of the readiness of the organization in conducting an internal audit. This is because it aims at establishing any nonconformity to the required standards not met by ADWEA and recommendation for any corrective measures before the actual audit. The internal audit of ADWEA should be an independent exercise with all auditors assured of independence.
Moreover, they should be provided with all necessary resources, reports and support in order to be efficient in their internal audit. The auditors examine the utilization of resources of the organization, conformation to the required standards and other issues requested by the management of ADWEA. The report findings are to be discussed with the management. The findings reports should provided in an easy to read and use manner.
Works Cited
ADWEA. Independent Water and Power Producers. 2011. Web.
IRS. Pre-Audit Analysis. 2010. Web.
Switzer, Susan. Internal audit reports post Sarbanes-Oxley: a guide to process-driven reporting. Hoboken, NJ: John Willey & Sons. 2007.
Woodside, Gayle and Aurichio Patrick. ISO 14001 auditing manual. New Jersey, NJ: McGraw-Hill Professional.