Audit, Assurance, Fraud Awareness, and Ethics

Audit and Assurance

• Audit: Systematic, independent examination of data, statements, records, operations, and performances for a stated purpose.

• Assurance: Independent professional service to improve information quality for better decision-making.

• Audit is a type of assurance service.

Understanding Assurance:

• Three parties: data owner, independent practitioner, stakeholders.

• Subject matter and standard criteria.

• Evidence collection and professional reporting.

• Assurance services deal with past data.

Rationale for Audits

• Governance tool to assure management and stakeholders.

• Continuous improvement of financial and administrative systems.

• Identify policy gaps and risks.

• Establish financial integrity.

Types of Audits

• Statutory Audits: Required by law (Income Tax Act, Societies Registration Act).

• Donor Audits: Assurance to donors on fund utilisation.

• Internal Audits: Assurance to management on compliance and asset protection.

Things about Audits

• Audits are a badge of honour and an opportunity for improvement.

• Self-audit regularly to stay ready.

• Audits build stakeholder trust.

• Cooperate fully and be transparent with auditors.

Why We Dislike Audits

• Disrupt routine work.

• Require time and documentation.

• Identify mistakes.

• Possible misunderstandings.

Dealing with Audits - Before Audit

• Organise documents systematically.

• Obtain Scope of Work if possible.

• Prepare required data.

• Appoint a knowledgeable point person.

• Arrange a proper workplace for auditors.

Dealing with Audits - When Audit Starts

• Hold an opening meeting.

• Clarify audit requirements.

• Plan field trips if needed.

• Set schedules for clarifications.

Dealing with Audits - During Audit

• Provide timely clarifications.

• Request draft observations early.

Dealing with Audits - After Audit

• Conduct a closing meeting.

• Discuss and understand observations.

• Prepare and implement an action plan.

• Periodically review action points.

Audit Understanding Points

• Orient auditors properly.

• Systems evolve; gaps should not be harshly judged.

Fraud Awareness

What Constitutes Fraud?

• Act or omission causing harm.

• Intent to deceive.

Types of Fraud:

• Corruption: Conflict of interest, rigged bids, unnecessary procurement.

• Asset Misappropriation: Theft, skimming, fraudulent payments.

• Financial Statement Fraud: Over/undervaluing assets, timing differences, fictitious revenues.

Fraud Red Flags:

• Behavioural issues (arrogance, slowness, secrecy).

• Dominating employees.

• Close ties with vendors.

• Disorderly accounting.

• Orphan funds.

• Too good to be true deals.

Ethics, Accountability and Transparency

Ethics

• Doing the right thing the right way.

• Can and should be taught.

• Organizations must have a written Code of Ethics.

• Train employees and stakeholders on ethical behaviour.

Coverage of Ethics

• Business ethics guide decisions on governance, discrimination, bribery, and responsibility.

Common Ethical Violations

• Discrimination, harassment, unethical accounting, health and safety negligence, nepotism, favouritism.

Common Ethical Dilemmas

• Hiding fraud.

• Misrepresenting products.

• Misuse of official resources.

• Accepting unauthorised gifts.

• Dealing with related vendors.

Transparency

• Be open, honest, and straightforward.

Examples of Transparency:

• Disclose plans early.

• Make salaries public.

• Keep promises.

• Bring your authentic self to work.

Accountability

• Accept responsibility for ethical conduct.

• Accountability extends to all stakeholders.

• Judged based on performance.

Examples of Accountability:

• Setting clear employee expectations.

• Managing client funds responsibly.

• Taking ownership of mistakes.

Responding to Financial Problems

• Stay calm.

• Verify facts.

• Evaluate options carefully.

• Communicate honestly.

• Seek external help if needed.

• Brainstorm creative solutions.

Interdependence Among Functions

• Financial management links governance, planning, programs, evaluation, and overall leadership.