• Background
• Audit Objective and Scope
• Audit Summary and Opinion
• Detailed Audit Comments

Background

Audit Objective and Scope

Audit Summary and Opinion

1. "The X. Department's system of internal control is effective."

   Effective opinions are reported when we perform an audit and there are no detailed comments to report.

2. "The X. Department's system of internal control is effective except as noted in our detailed audit comments."

   Effective except as opinions are reported when the audit or review finds effective overall control but detailed comments for improvement are included.

3. "The X. Department's system of internal control ensures compliance, reliability of information, accomplishment of objectives and the safeguarding of assets. However, the Department's system of internal control does not ensure economic and efficient use of Company resources. As explained in the detailed audit comments, management has not established cost control systems for measuring product costs..."

   We report not effective opinions when the auditor concludes there are major control deficiencies in one or more of the scope objectives. These control deficiencies must have a significant impact on operations.

Detailed Audit Comments

• Standards - Acceptable criteria used by the auditor to measure performance and evaluate controls. Standards may have already been established by management, such as written policies, procedures and rules. Where standards do not exist, the auditor must determine reasonable standards and seek agreement with them by the customer.

• Conditions - Concise description of what we found and the audit procedures and samples used by the auditor. The customer must agree with the facts presented.

• Cause - The underlying reason the standards were not met. The auditor should always attempt to determine the root cause of the deviation. Otherwise, our recommendation may address only the symptom and not the problem.

• Effect - Answers the "So what!" question. We must demonstrate the consequences of conditions which do not meet standards. The consequences should be significant - not merely some deviation from a procedure. Effect is what persuades the customer of the need for corrective action.

• Management Action Plan (MAP) - Presents the mutually agreed upon action that management will take. The MAP is the joint effort of the audit team and the management taking action.

Report Distribution

We send copies of the audit report up through the customer's chain of command to the president of the company involved. Distribution of other copies are made as directed by the Director - Audit Services.