Chapter 09. Performing the Audit: Functional, Operational, or Business Areas
Introduction
This chapter explores the specialized approaches and methodologies for auditing financial functions, operational processes, IT environments, human resources and compliance frameworks, and sector-specific challenges. It opens with an exploration of auditing financial functions, offering a deep dive into the essential financial processes and controls that safeguard an organization’s assets and ensure the integrity of its financial reporting. It covers risk assessment strategies specific to financial auditing, techniques for auditing revenue, expenditures, financial reporting processes, asset management, and the detection of typical financial fraud schemes. Additionally, it discusses reconciliation and end-of-period activities, supplemented by case studies that illustrate the identification and correction of financial misstatements.
In the segment on operational audits, the chapter defines the scope and objectives of operational auditing, emphasizing the evaluation of the efficiency and effectiveness of operational processes. It introduces critical performance indicators (KPIs), benchmarking techniques, and identifying process improvement opportunities. Auditing in an IT environment is addressed comprehensively, highlighting the significance of IT governance frameworks and the auditing of IT general controls and application controls. Cybersecurity auditing, data privacy, cloud computing, and third-party service provider audits are explored in detail. The chapter also considers emerging technologies like the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain, offering auditors tools and techniques for effective IT auditing.
The chapter then transitions to human resources and compliance auditing, examining HR policies and procedures, recruitment, onboarding, termination processes, payroll and benefits compliance, and Diversity, Equity, and Inclusion (DEI) initiatives. It discusses the importance of auditing workplace safety and health compliance, managing labour relations and contract risks, and reporting HR and compliance audit findings and recommendations. Finally, sector-specific auditing areas and challenges are presented, providing insights into unique risks and controls faced by different industries, including financial services, healthcare, manufacturing, the public sector, and the technology sector. The chapter talks about tailoring audit approaches to meet the specific challenges of diverse sectors.
Learning Objectives
By the end of this chapter, you should be able to
- Assess and improve financial controls and processes, identify and address fraud risks, and apply case studies to understand financial misstatements and corrections.
- Gain skills in evaluating the efficiency and effectiveness of operational processes, using KPIs and benchmarking for performance assessment, and identifying areas for process improvement.
- Understand how to apply IT governance frameworks like COBIT, ITIL, and ISO/IEC 27001 in auditing, assess IT general and application controls, and evaluate cybersecurity measures and data privacy compliance.
- Learn to audit HR policies and procedures for compliance with labour laws and best practices, assess recruitment, onboarding, and termination processes, and evaluate DEI initiatives and workplace safety.
- Acquire the ability to adapt auditing approaches to meet the unique challenges and risks of various industry sectors such as financial services, healthcare, manufacturing, public sector, and technology.
Methods and techniques used to identify, evaluate, and prioritize risks to minimize their impact on organizational objectives and ensure effective risk management.
Procedures performed at the close of an accounting period, such as reconciliations and adjustments, to ensure accurate financial reporting and compliance.
