Question

What are the components/elements of a well written audit report finding/observation?
Discuss one of them in detail.
(Note: Do not discuss the components of the Audit report, but only of a finding/observation)

Answer 1

Five attributes of an audit finding/ observation:

1. Condition: Statement that describes the results of the audit. What is the particular problem identified?
2. Criteria: Standards used to measure the activity or performance of the auditee. What is the standard that was not met? The standard may be a company policy or other benchmark.
3. Cause: Explanation of why a problem occurred.
4. Effect/ Consequence: The difference between and significance of the condition and the criteria. What is the risk/negative outcome (or opportunity foregone) because of the finding?
5. Recommendation / Corrective Action: Action that must be taken to correct the cause. What should management do about the finding? What have they agreed to do and by when?

Discuss of them in Detail :

I'll discuss about Criteria; which is as under:

Criteria should be developed for each area to be audited (line of audit inquiry or audit project). There can be one criterion or several. They focus, wherever possible, on the results that the program, operation, system, practice, or control is expected to achieve. When wording criteria, audit team members should:

Express each criterion as an expectation statement vis-à-vis the entity(ies) that is derived from the source authority for the criterion. The standards, measures, or expectations used in making an evaluation or verification.

• what should exist
• Written requirements (laws, regulations, instructions, manuals, directives, etc.)
• Overall objectives of agency or organization
• Auditor’s experience
• Common Sense, Prudent Business Practice
  • Credit Card Audit
• Verbal instructions
• Independent opinion of experts
• Generally accepted standards of the industry