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In this Aug 2003 issue of On Target :
Strategic Audits: The Wider Issues for Management Accountants
Notice of Annual General Meeting
What's On
Bookshelf
Strategic Audits: The Wider Issues for Management Accountants
Due to its wide scope, strategic audit issues are pertinent to management accountants, business analysts, audit directors, senior managers and executive-level management, as well as those aspiring to become someone who oversees audit, security, compliance and control functions. Similarly, Strategic Audits could not only dwell on highly technical matters, but also provide management and other stakeholders a perspective on information systems and technology issues at the strategic level. This will in turn promote good corporate governance by enabling managers to make well-informed planning and resource decisions that will ultimately enhance the value of the organisation.
Typically the following individuals will be most interested in the area of Strategic Auditing :
Management accountants and business analysts
Audit, control and security managers keeping up with current issues
Information technology audit directors
Risk managers
Senior and executive managers who oversee audit, security, compliance and control functions
Operational, managerial and financial audit professionals
Experienced information technology audit, control and security professionals desiring a view of issues facing information technology audit and security managers
Some of the issues raised in this area are as follows :
Continuous Auditing, Reporting and Assurance :
Increasing electronic transactions, deconstruction of business models, the paperless environment, and consequent risk have brought new attention to the concept of continuous audit with association research committees, academics and professionals. The morphing of technology and the contingencies and the platforms and models for continuous assurance are key aspects that require consideration in this area. The others are:
Continuous monitoring and control applications and alternate structures for the adoption of continuous reporting and assurance.
Continuous Corporate Governance Scorecards including Corporate Radar Systems, Benchmarking, Time Series Analysis and Financial Statement Analysis
Recruiting, Training, Retaining and Retiring Audit Staff :
No one can argue that the last two years has not seen significant changes in the IT audit profession. With three significant contributing events—the downturn in the economy, the Enron- WorldCom- Andersen scandal—many of our assumptions about the profession have been proven to be wrong. Organisations need to consider what short- and long-term changes may be required in the future in terms of recruiting, training and retaining staff.
Further issues in this area include :
Long-term changes in the internal audit profession
Developing new strategies to cope with all the changes in personal career planning, sources for hiring, retention strategies and training methodologies
Changes in focus of many internal audit plans and charters to meet the new demands of the Sarbanes-Oxley Act and other new legislation
How to better evaluate the personal goals and needs of potential new employees and to measure those against the demands on your audit department
The tenets of behavioural interviewing to more accurately predict success in a changing internal audit environment
Risk Management Report Drivers :
Today’s technology reviews require the IT auditor to understand business processes, review and assimilate volumes of data about what resources are accessible, and articulate the reporting drivers that influenced the rating of the review. Understanding how to review and assess risk and determining which aspects of the organizations processes should be evaluated has necessitated a new approach and understanding of risk management and report drivers that guide management to the audit’s conclusion. Report drivers include: control elements, technology impact, exposure population and sample relationships. Related issues include :
Management’s concept of business processes and communication issues
Identifying business risk and performing risk assessments
Determining audit coverage and linking to regulatory compliance
Identifying controls/management points within the IT environment.
Developing Integrated Audit Approach :
Consideration is given to aligning operational, financial and technical audit objectives for corporate success. Organizations often encounter many challenges when attempting to adopt such a strategy and need to identify and evaluate the key objectives of the operational, financial and technical audit constituents within, and some of the barriers that inhibit its stakeholders from working together effectively. A framework to consider business controls and the impact of the audit approach to the broader corporate agenda needs to be developed. Related issues include:
Key concepts of a successful integrated audit approach and actively share real-life experiences, challenges and ideas
Leading practices to better align operational, financial and IT audit within the internal control arena.
The importance of bringing internal controls to life
The value and benefit of adopting an integrated audit approach to the audit committee and senior executives
Developing Effective Audit Charter and Practices :
An effective internal audit program begins with the audit charter and key operating practices. It is essential that a properly developed charter, supported and approved by senior management, be implemented. The internal audit charter provides the basic framework for the management to understand the activities of the department. In conjunction with the charter, basic internal audit practices help guide the department in day-to-day tasks as well as establish the expectations of operating management. The components of an effective audit charter and the key components necessary for development need to be explored. These include :
What constitutes an effective audit charter
Developing support and approval for your audit charter
Identifying key internal audit practices that support the organization’s control environment
Keeping audit practices current and aligned.
In the next issue of ON TARGET, more issues relating to Strategic Audits will be discussed and concluded.
Notice of Annual General Meeting
The Annual General Meeting of the Institute of Certified Management Accountants will be held on Tuesday 16th September 2003 at 6pm for 6:30pm, at the new Institute Offices at: CMA House, Monash Corporate Center, Unit 5, 20 Duerdin Street, Clayton North, Victoria 3168, Australia.
The meeting will be preceded by a short talk given by Leon Duval, the President of ICMA on the topic: “The Impact of Corporate Governance Changes on the Accounting Profession” .
Please inform the Secretariat [Fax: 61-3-95447299] of your attendance for catering purposes by Monday 8th September 2003.
What's On
August 2 and 3, 2003 :
GMA Exams in Singapore Run at AEC Centre
September 1-4, 2003 :
Advanced Management Accounting: 3-Day Seminar in Sri Lanka Conducted by the Institute of Chartered Accountants of Sri Lanka and ICMA
September 16, 2003 :
(Postponed from earlier date of August 21) ICMA Annual General Meeting
CMA HOUSE Unit 5, 20 Duerdin Street Clayton North, Victoria 3168 Australia
September 28-29, October 1-2, 2003 :
Advanced Strategic Management Accounting: 4-Day Seminar in Sri Lanka Conducted by the Institute of Chartered Accountants of Sri Lanka and ICMA
Book Shelf
The July, 2003 issue of CACharter has a lead story by Peter Switzer, “Higher Yearning” (pp. 25-29). For those who need an update, the article outlines some of the changes proposed for the Australian higher education system flowing from the review by Brendan Nelson, Federal Minister for Education. Some interesting statistics for the past few years are provided but the focus of the article is highlighted in Switzer’s observation that “Education as an issue is not just a political controversy. … Like it or not, education is not just delivered for education’s sake – government finances demand that it be planned and provided in a business-like way.”
This issue also has an article discussing the education of accountants (“Business Reloaded” by Maureen Jordan, pp. 34-35). Steve Albrecht (co-author of Accounting Education: Charting a Course through a Perilous Future) is quoted: “Accountants need to have a broad business background first and be an accountant second. Dramatic changes are taking place in business world, and accountants who don’t keep up with these changes will soon become outdated.” The article also reports on the ICAA’s CA program.
Common sense would suggest that most university business schools should easily succeed in the “business” of higher education because they only have to “practice what they preach”. We would presume that competition amongst universities will ensure that the high quality accounting education required by business and the profession will be amply supplied. After all, accounting courses are the “cash cows” of many universities. I suppose time will tell whether competition (and common sense?) will prevail over university politics. Why do I have my doubts?
Please feel free to share anything that you have found interesting. You can send your ideas to: Bill Richardson, Dept of Accounting & Finance, Monash University, PO Box 197, Caulfield East VIC 3145.
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