practitioner based case study that will cover the

1 CASE STUDY AUDIT PLANNING & RISK ASSESSMENT 1. INTRODUCTION The objective of this case study is to reinforce the messages contained in the Audit Planning & Risk Assessment Guide through the completion of a practitioner based case study that will cover the following key stages in the audit planning and risk assessment cycle:  Identification of the Audit Universe and related objectives;  Identification of specific risks, the measurement of these risks and how this can be used to focus audit activities on high risk areas;  Using the risk assessment to enhance audit resource planning and allocation;  How risk assessment impacts on overall annual audit planning. 2. BACKGROUND INFORMATION & THE AUDIT UNIVERSE The table below provides information on the entities that comprise the audit universe that your internal audit unit is mandated to audit annually. However, due to a lack of resources and in recognition that not all account areas need to be audited annually you need as a first-step to critically analyse, assess and select those account areas that will be included in your annual audit implementation plan. The assumption for this case study is that the internal audit department is located in the Ministry of Transport and Roads and has the scope to engage in internal audit activities in all areas of the Ministry of Transport and Roads. Decentralised internal audit is a relatively new function in the public administration. The service was established by a Government decision in 2009 and has been operational since 2010. The year you are planning 2014 will be the fifth-year of internal audit operations.2 The decentralised internal audit department has a team of 2-auditors (one Audit Manager and one audit trainee). The Audit Manager is a member of the Institute of Internal Auditors and the other team member has a degree in economics. The internal audit department has historically concentrated its activities applying inspection and control methodologies and has limited experience of risk based audit planning and specialist audit topics. In 2014 you have a potential audit universe or scope of X processes in the Ministry of Transport and Roads. . The total expenditure budget for your Ministry for 2014 is Euro 100 m and the revenue budget is Euro 10 m. 60% (Euro 60 m) is planned to be spent on personnel costs, Euro 10 m (10%) on other nonpersonnel recurrent expenditure and the balance of Euro 30 m (30%) on capital expenditure. The income is derived from licences for personal and road haulage vehicles.3 Structure of the Ministry of Transport and Roads Minister State Secretary Secretary General Economies and Planning Department Administration and Human Recourse Department Internal Audit Department International Relation and Security Department General Directorates Air Transportation Directorate Roads Transportation Directorate Water Transportation Directorate4 Table 1: The Audit Universe Institution Budgeted Expenditure Budgeted Revenue Other Relevant Information 1. Ministry of Transport & Roads Euro 100 m Euro 10 m This Ministry is responsible for managing the government policy to upgrade the national highways to international standards. After 20-years of neglect the highway system is in poor condition and starting from 2010 the Government published plans to completely upgrade the 300 km of national highway by the end of 2015. In 2013 the Minister of Transport and Roads was dismissed by the Prime Minister and he was referred to the Anti-Corruption Commission after being accused of attempting to influence the award of road construction projects to a single contractor. The case is still being investigated and the new Minister has publicly pledged that he will ensure that all future tender processes for road construction will be transparent, fair and provide value for money. Euro 60 m (60%) has been budgeted as expenditure for personnel costs. The salaries and other emoluments are managed through a centralised agency that has responsibility for all payments for public administration employees. In previous years the payroll for this Ministry was found to contain a number of ‘ghost†workers. However this was at a time when each line Ministry had the sole responsibility for payroll management. Since the introduction of a centralised information technology based5 Institution Budgeted Expenditure Budgeted Revenue Other Relevant Information personnel and payroll management system the controls over the entire range of personnel and payment management processes have been more effective in preventing and detecting attempts to manipulate the payroll processes. The most recent report of the Auditor General on the payroll control arrangements confirmed that the security and access controls provided a high degree of assurance in its ability to prevent and detect material fraud or other manipulations of the payroll. Non-payroll recurrent expenditure is budgeted as Euro 10 m (10%) for 2014…

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