THE NIK
REPUBLIC OF POLAND
USE OF IT TOOLS
IN AUDITING
Wiesław Karliński
economic adviser
Department of Budget & Finance
Wieslaw_Karlinski@nik.gov.pl
AREAS OF USING IT IN AUDITING
-
AS SUBJECT OF AUDIT
-
AS TOOLS AIDING THE AUDITING’S
ORGANIZATION AND MANAGEMENT
-
AS TOOLS AIDING AUDITING PROCESS
-
AS TOOLS AIDING PREPARATION OF
AUDITING’S REPORTS
2
IT TECHNIQUES
APPLICATIONS IN AUDITING PROCESS
1. AUDIT STUDY & STATISTICAL SAMPLING
STUDYING FAIRNESS OF FINANCIAL AND ACCOUNTING
RECORDS & CORRECTNESS OF BUDGET REPORTING
2. ANALYTICAL STUDY OF DATABASES
•
•
STUDYING OF SELECTED INCOMES IN STATE BUDGET
STUDYING OF TAX SYSTEM
3
STATE BUDGET AUDIT – CONDITIONS (1)
1.
The number of audited institutions (budget entities) ~ 400.
2.
About 80-90% entities have applied computer
accounting systems which were unfortunately prepared
by many different providers.
3.
So they do not guarantee full accessibility to data in the
electronic form and using typically CAATs tools.
4.
The standards of accountancy in budget entities are not
sufficiently specified.
4
STATE BUDGET AUDIT – CONDITIONS (2)
5.
The differences in size of audited budget entities bring
difficulties in forming indiscriminated assumptions .
6.
Auditors do not posses enough experience and
knowledge in statistical sampling and databases’
transformation.
7.
The amount of time for a single audit study is very
limited.
5
FAIRNESS OF ACCOUNTING RECORDS :
STUDY METHODOLOGICAL ASSUMPTIONS (in 2002)
1. SELECTION OF EVIDENCE SAMPLE
RANDOM SELECTION, IRRESPECTIVE OF ACCOUNTING
ENTRIES FORMAT (AUTOMATED OR MANUAL)
2. PERFORMING AUDIT STUDY AND
DOCUMENTING FINDINGS
BASED ON SPECIFIC AUDIT FORM DESIGN
3. EXTRAPOLATION OF FINDINGS
BASED ON STATISTICAL METHODS
6
IT TOOL – „AUDITOR’S TOOL KIT (ASSISTANT)”
1
2
3
7
“AUDITOR’S TOOL KIT” - UNIVERSAL FUNCTIONS
1. SAMPLE SIZE CALCULATION:
• ATTRIBUTE SAMPLING
• VARIABLE SAMPLING
• PPS SAMPLING (Poisson’s Distribution)
2. SAMPLING:
• RANDOM-NUMBER GENERATOR
• SIMPLE RANDOM SELECTION (Excel Input File)
• PPS SELECTION (Excel Input File)
3. EXTRAPOLATION:
• PROPORTION ESTIMATION (Hypergeometric Distribution)
• MEAN-PER-UNIT ESTIMATION (Normal Distribution)
• MONETARY UNIT SAMPLING (Poisson’s Distribution)
8
„AUDITOR’S TOOL KIT” - SPECIAL FUNCTIONS:
REALIZATION OF STUDY step by step
random
sample
1. IDENTIFICATON OF POPULATION
2. SAMPLE SIZE & SELECTION
intentional selection
3. SAMPLE VERIFICATION
sample of expenditure
4. STUDY (QUESTIONNAIRE)
8. SUPPLEMENTARY
SELECTION
5. ADDITIONAL DATA
6. FINDINGS & REPORTS
7. EXTRAPOLATION OF
FINDINGS
FINAL ASSESSMENT
assessment
?
precision?
9
STUDYING AUDIT EVIDENCE:
EXPECTED PROBLEMS (in 2002)
1. AVAILABILITY OF POPULATION TO BE
STUDIED IN CHECKLIST FORMAT
2. CONSISTENT RULES AND TECHNIQUES FOR
IDENTIFYING ACCOUNTING EVIDENCE
3. VARIED SIZES OF POPULATIONS STUDIED
4. LACK OF KNOWLEDGE OF POTENTIAL
IRREGULARITIES’ SCALE
10
STUDYING AUDIT EVIDENCE:
SOLUTIONS
1. MANY (9) IDENTIFYING ACCOUNTING
EVIDENCE METHODS (including electronic data
form)
2. ATTRIBUTE SAMPLING WITH SEQUENTIAL
ANALYSIS
3. IDENTICAL RELATIVE MATERIALITY FOR
EVERY ENTITY
11
Example Forms (1): Audit Questionnaire
12
Example Forms(2): Estimation & Assessment
findings in strata
parameters
of extrapolation
estimation &
assessment &
error of estimation
supplementary
selection
estimation
weighted by value
13
Example Forms (3): Collective Analysis of Findings
FAS
opinion
opinion for
budget chapter
Detailed Statistics
opinion
FAS
opinion
FAS
FAS
opinion
~ 400
14
STUDY IMPLEMENTATION & SCOPE
AUDIT RUN
BY 8 DEPARTMENTS & 16 SCC REGIONAL OFFICES
AUDITEES
IN 2003 :
OVER 370 ENTITIES
INCLUDING 106 LOCAL GOVERNMENT ENTITIES
IN 2004 :
356 ENTITIES
INCLUDING 121 LOCAL GOVERNMENT ENTITIES
15
AUDIT RESULTS in 2004
(215 STATE BUDGET ENTITIES)
INCORRECT ENTRIES
number of
entities
FORMAL MISTAKES
OPINION
%
number of
entities
%
173
80,5
POSITIVE
142
66,0
30
14,0
POSITIVE WITH
RESERVATION
49
22,8
12
5,6
NEGATIVE
24
11,2
MOST FREQUENT TYPES OF IRREGULARITIES
INCORRECT ACCOUNTING MONTH
INCORRECT ENTRY TO ACCOUNTS
INCORRECT CURRENT CONTROLS OR EVIDENCE REFERRALS
INCORRECT AMENDMENTS TO EVIDENCE
LACK OF CONSISTENT EVIDENCE IDENTIFICATION
16
IT TECHNIQUES – APPLICATIONS (2)
2. STUDY OF DATABASES
SPECIFIC CASE :
LOAN PENALTY TICKETS IN VOIVODS’
BUDGETS
17
COLLECTING INCOMES FROM PENALTY TICKETS
- GENERAL SCHEME
ORGAN AUTHORIZED
TO PENALIZE
TAX
OFFICE
VOIVOD
> 2mln /year
Record
penalty
ticket
Database
Payment
Execution
Title
Execution
Penalization


Payment
7 days
?? (max=1 month)
TO
?? (max=2 months)
DATABASE AUDITED
WITH ANALYTICAL
METHODS
18
COLLECTING INCOMES FROM PENALTY TICKETS ORGANIZATION OF STUDY
ACL (Audit Command Language)
VOIVOD’S
ASSESSMENT
Excel
DB-1
Voivodship
databases *
Exportation
Analysis
Findings
DB-16
*) total: 16 voivodships, 23 databases, 5 mln tickets
Comparative
Analysis
Excel
VOIVOD’S
ASSESSMENT
19
TICKETS’ STUDY - EXEMPLARY FINDINGS (1)
317
AVERAGE TIME NEEDED TO RECORD PENALTY TICKET AND
ISSUE PAYMENT EXECUTION TITLE IN 2002
300
270
2002 record
titles (recorded in 2002)
240
number of days
210
??
>180 days
180
150
120
90
60
30
0
02
04
06
08
10
12
14
16
18
20
22
24
26
28
30
32
voivodship: chapter 85/02 - 32
20
TICKETS’ STUDY - EXEMPLARY FINDINGS
DELAY IN VINDICATION OF INCOMES FROM TICKETS
(DISTRIBUTION IN % OVER A NUMBER OF DAYS)
40
35
2002 vindication (In Total)
2002 vindication (without 5 voivodships)
percentage of tickets
30
25
20
15
10
5
0
do 30
do 45
do 60
do 90
do 120
do 180
do 270
> 270
DAYS ELAPSED UNTIL PAYMENT, ISSUING EXECUTION TITLE OR CONCLUSION OF STUDY
21
PLANS & PROBLEMS
•
WIDER ACCESIBILITY TO DATA IN
ELECTRONIC FORMAT (outside the NIK influence)
•
FURTHER REFINEMENT OF THE
METHODOLOGY (sampling & analytical methods)
•
IMPROVEMENT OF APPLIED TOOLS
•
ADDITIONAL STAFF TRAINING
22
THE NIK
REPUBLIC OF POLAND
THANK YOU FOR YOUR KIND
ATTENTION