Model Internal Audit Assignment Report
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Transcript of Model Internal Audit Assignment Report
MINISRY OF ANYTHING
INTERNAL AUDIT REPORT (DRAFT)
TREASURY MANAGEMENT (8.00/01)
Distribution:
Manager A - for informationManager B - for comment
DECEMBER 2001
MINISRY OF ANYTHING
INTERNAL AUDIT REPORT
TREASURY MANAGEMENT
CONTENTS
SECTION PAGE
1. Introduction 1
2. Executive Summary 2
3. Findings and Recommendations 3
Appendix A Internal Audit Methodology 5
Appendix B Action Plan of Agreed Recommendations 6
ASSIGNMENT CONTROL:
Draft report issued: November 2001 Days planned: 15 Auditor: Francis Dark
Final report issued: December 2001 Days taken: 15 Supervisor: Allan Wight
Cost of audit: £2,100
Ministry of Anything 8.00/01 Treasury Management
MINISRY OF ANYTHING
INTERNAL AUDIT REPORT
TREASURY MANAGEMENT
1. INTRODUCTION
Background
1.1 We reviewed the system of Treasury Management during November 2000 as part of our 2000/01 internal audit plan.
1.2 The Ministry has outstanding debts of approximately £3.2 million paying interest rates of between 6.875% and 15.875%. It also has investments of over £0.75 million gaining interest at rates of between 5% and 7.2%. The annual budget indicates that interest payable in 1999/00 will be nearly £250,000 and interest received will be £34,000.
Audit Objectives
1.3 The objective of our review was to assess whether existing controls should provide reasonable assurance that the following control objectives are being achieved:
that appropriate cash flow projections are developed and adequate management information is generated in respect of past and future income and expenditure
banking arrangements and facilities are appropriate and adequately controlled
all suitable loans and investment opportunities are identified and evaluated
treasury management is undertaken in such a way that the Ministry's short and long term interests are balanced and safeguarded
Acknowledgement
1.4 We would like to thank the following staff for their time and co-operation:
Name Position
Judy Jones Accountancy Services Manager
Sally Smith Accountant
Brian Brown Accountancy Assistant
Ministry of Anything 8.00/01 Treasury Management Page 1
MINISRY OF ANYTHING
INTERNAL AUDIT REPORT
TREASURY MANAGEMENT
2 EXECUTIVE SUMMARY
2.1 Overall conclusion
In most areas we consider that the current controls are adequate. However, we consider that changes need to be made to ensure that bank reconciliations act as an effective control over the accuracy of the Ministry's financial records.
For this reason we consider that controls within the system should provide substantial assurance that risks material to the achievement of system objectives are adequately managed.
See Appendix A Paragraph 4, for an explanation of this opinion.
2.2 Control objective: to ensure that appropriate cash flow projections are developed and adequate management information is generated in respect of past and future income and expenditure
We consider that current controls should provide adequate assurance that this control objective should be achieved.
2.3 Control objective: to ensure that banking arrangements and facilities are appropriate and adequately controlled
We consider that, whilst the current controls are not inadequate, a number of improvements could be introduced to ensure that further assurance is provided and especially to ensure that bank reconciliations act as an effective control.
2.4 Control objective: to ensure that all suitable loans and investment opportunities are identified and evaluated
We consider that current controls should provide adequate assurance that this control objective should be achieved.
2.5 Control objective: to ensure that treasury management is undertaken in such a way that the Associations short and long term interests are balanced and safeguarded
We consider that current controls should provide adequate assurance that this control objective should be achieved.
Ministry of Anything 8.00/01 Treasury Management Page 2
3. FINDINGS AND RECOMMENDATIONS
We have provided an explanation of our reporting methodology at Appendix A.
3.1 Control objective: to ensure that that appropriate cash flow projections are developed and adequate management information is generated in respect of past and future income and expenditure
Findings Implications Recommendations Priority
3.1.1
The Finance Manager posts a range of banking transactions and the Finance Officer undertakes the bank reconciliations each month
The bank reconciliations do not act as a clear check on the accounting for cash and bank transactions
The Finance Manager should undertake the monthly bank reconciliations and these should be reviewed, initialled and dated by the Chief Executive
Significant
3.1.2
The Finance Officer takes the cash bankings to the Co-operative Bank in the centre of Nottingham three days a week
The Finance Officer spends a significant length of time undertaking the bankings for the Association
Consideration should be given to alternative methods of undertaking the bankings
Advisable
3.1.3
Committee members may not be available to sign cheques as required
Cheques with a value of less than 5,000 should not be signed by Members, two members of staff should be sufficient
Advisable
Ministry of Anything 8.00/01 Treasury Management Page 3
3.2 Control objective: to ensure that banking arrangements and facilities are appropriate and adequately controlled
Findings Implications Recommendations Priority
3.2.1 The Finance Manager posts a range of banking transactions and the Finance Officer undertakes the bank reconciliations each month
The bank reconciliations do not act as a clear check on the accounting for cash and bank transactions
The Finance Manager should undertake the monthly bank reconciliations and these should be reviewed, initialled and dated by the Chief Executive
Significant
3.2.2 The Finance Officer takes the cash bankings to the Co-operative Bank in the centre of Nottingham three days a week
The Finance Officer spends a significant length of time undertaking the bankings for the Association
Consideration should be given to alternative methods of undertaking the bankings
Advisable
3.2.3 The Finance Officer takes the cash bankings to the Co-operative Bank in the centre of Nottingham three days a week
Committee members may not be available to sign cheques as required
Cheques with a value of less than 5,000 should not be signed by Members, two members of staff should be sufficient
Essential
Ministry of Anything 8.00/01 Treasury Management Page 4
APPENDIX A
METHODOLOGY
1. We performed this audit using systems auditing methodology. We identified the objectives of the system and control objectives in advance, and agreed these with the appropriate manager. Following interviews with relevant managers and staff, we identified and evaluated the existing controls against the controls we consider necessary to achieve each control objective. From this work we decided the level of testing required. We then used our control evaluation and the results of our testing to form an opinion on the overall effectiveness of the internal control system.
2. Where we do not consider that a control objective is being efficiently achieved we have made recommendations that, if implemented, should ensure that the control objective is realised in future.
3. To assist management in the pursuit of value for money we have also drawn attention to points, identified during the review, which should help to improve the economic, efficient and effective use of the Ministries resources.
4. As a result of the above work we formed an overall opinion on the extent that existing controls should provide adequate assurance that all significant risks to the achievement of the system’s objectives are being effectively managed. We then graded the control system of the basis of the following scale:
a) controls within the system should provide full assurance that risks material to the achievement of system objectives are adequately managed
b) controls within the system should provide substantial assurance that risks material to the achievement of system objectives are adequately managed
c) controls within the system should provide limited assurance that risks material to the achievement of system objectives are adequately managed
d) controls within the system should provide little assurance that risks material to the achievement of system objectives are adequately managed.
5. In the third section of this report, on Findings and Recommendations, we have operated a system of exception reporting. We have only referred to a control objective if we do not consider that existing controls should provide reasonable assurance that the objective will be achieved efficiently.
6. We have assigned each of our recommendations to one of the following priorities:
Essential - action that we consider is imperative to ensure that the organisation is not exposed to high risks
Significant - action that we consider is necessary to avoid exposure to significant risks
Advisable - action that we consider is desirable and should result in enhanced control or better value for money.
7. We view risk as the chance, or probability, of one or more the Ministry's objectives not being achieved. Risk refers both to unwanted outcomes that might arise, and to the potential failure to achieve desired results.
Ministry of Anything 8.00/01 Treasury Management Page 5
APPENDIX BACTION PLAN
We consider that the following recommendations are necessary to avoid, or reduce, the risks we have identified. Where managers have agreed to implement these recommendations, they consider that the benefits will outweigh the costs of introducing the controls and that other, more cost effective, controls are not available.
Para.No.
Recommendation Priority Management Comment Implementation date
Manager Responsible
3.2.3 Cheques with a value of less than 5,000 should not be signed by Members, two members of staff should be sufficient
Essential
3.1.1 The Finance Manager should undertake the monthly bank reconciliations and these should be reviewed, initialled and dated by the Chief Executive
Significant
3.21 The Finance Manager should undertake the monthly bank reconciliations and these should be reviewed, initialled and dated by the Chief Executive
Significant
3.3.2 References should be kept, this needs to be documented in procedures
Significant
3.1.2 Consideration should be given to alternative methods of undertaking the bankings
Advisable
3.2.2 Consideration should be given to alternative methods of undertaking the bankings
Advisable
Ministry of Anything 8.00/01 Treasury Management Page 6
Ministry of Anything 8.00/01 Treasury Management Page 7