PAKISTAN - US ENERGY PROGRAM
Workshop
Internal Audit Manual
Update
9 September, 2011
PAKISTAN - US ENERGY PROGRAM
Agenda
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Welcome
Internal Audit Manual Update
• Introduction
• Current Manual
• Weaknesses
• Limited application
• Compliance with laws, regulations, organizational policies and procedures
• Internal controls over financial reporting
• Proposed internal audit manual framework
• Discussion
• Final Internal Audit Manual Framework
Independent Auditor’s Comments in Letter to BODs
Co-Sourcing
Independent Auditor’s Annual Audit Report
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Independent Auditor’s Comments
• The opinion letter of one external auditor in its letter to the DISCO BOD
reminds the DISCO that “.. the Board’s responsibilities include..maintenance of
adequate accounting records..internal controls, ..the selection and application
of accounting policies,..safeguarding of the assets of the Company and
prevention and detection of frauds and irregularities..”.
• In a separate comment from another external auditor in its letter to the DISCO
BOD it states “..Our review of internal audit function revealed that it is not as
effective and independent as it should be, especially when compared to
international standards..the department has no means to ensure the future
compliance made and disciplinary actions taken by management to
remove/settle the internal audit findings..we recommend that the BOD
evaluate the internal audit function to strengthen this activity and
independence..”
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Co-Sourcing
• Co-sourcing is a partnership between the DISCO and an outside vendor, a
professional audit service provider. An audit firm is chosen, which works with
and often alongside—but doesn't replace—the existing internal audit staff
based on specific skills needed to get the job done. When the project is
finished the audit firm's job is over.
• Co-sourcing is different consulting because the DISCO’s personnel play an
ongoing role in the project. In a typical consulting project, a consultant comes
into a company, plans and performs a specific task and then presents a report,
working independently most of the time. In a co-sourcing arrangement, the
DISCO staff takes an active part in project planning and decision making and
may participate in preparing the final report. Instead of relinquishing control
over an activity DISCO managers involved in co-sourcing actively manage and
work alongside the specially skilled outsiders.
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Co-Sourcing (cont’d)
• Provide additional resources for an internal audit manual with
an expanded scope.
• Introduce a higher level of expertise to the internal audit
function.
• Establish a reliable and independent internal audit resource
which can report directly to BOD Audit Committee.
• Provide training to DISCO internal audit staff.
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Independent Auditor’s Annual Audit Report
• Responsibility of management to establish and maintain a system
of internal controls.
• Expand the scope of the annual audit.
• Report on compliance and internal controls over financial
reporting.