Key Stages in the Audit Planning & Risk Assessment Cycle
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.
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.
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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 non-personnel 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.
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Structure of the Ministry of Transport and Roads
Minister
State Secretary
Secretary General
Economies andAdministrationInternal AuditInternationalPlanningand HumanDepartmentRelation andDepartmentRecourseSecurity DepartmentGeneral DirectoratesAir TransportationRoads TransportationWater TransportationDirectorateDirectorateDirectorate
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Table 1: The Audit Universe
InstitutionBudgeted ExpenditureBudgeted RevenueOther Relevant Information1. Ministry ofEuro 100 mEuro 10 mThis Ministry is responsible for managing the government policy toTransport & Roadsupgrade the national highways to international standards. After 20-yearsof neglect the highway system is in poor condition and starting from 2010the Government published plans to completely upgrade the 300 km ofnational highway by the end of 2015.In 2013 the Minister of Transport and Roads was dismissed by the PrimeMinister and he was referred to the Anti-Corruption Commission afterbeing accused of attempting to influence the award of road constructionprojects to a single contractor.The case is still being investigated and the new Minister has publiclypledged that he will ensure that all
