Auditor - Controller Internal Audit Manual Revision: 0 Dated: November 8, 2016 SUTTER COUNTY INTERNAL AUDIT MANUAL Contents Section 1.0 – General ................................................................................................. 1 1.1 Introduction ......................................................................................................1 1.2 Changes ............................................................................................................2 Section 2.0 – Audit Division ......................................................................................2 2.1 Internal Audit Overview ..................................................................................2 2.2 Definitions ........................................................................................................2 2.3 Department Organization Charts .....................................................................3 2.4 County Staff Report and Motion .....................................................................3 2.5 Code of Ethics ..................................................................................................3 2.6 Specific Responsibilities & Goals ...................................................................4 2.7 Duties and Responsibilities by Level .............................................................. 4 Section 3.0 – Administrative Issues ...........................................................................4 3.1 Introduction ......................................................................................................4 3.2 Employment Policies .......................................................................................5 3.3 Personal Conduct .............................................................................................5 3.4 Time Reporting ................................................................................................6 3.5 Internal Auditor and Supervisor Evaluations .................................................. 6 3.6 Training ............................................................................................................6 3.7 Equipment Accountability ...............................................................................7 Section 4.0 - Auditing Concepts ................................................................................7 4.1 Introduction ......................................................................................................7 4.2 Audit Risk ........................................................................................................8 4.3 Internal Controls ..............................................................................................9 4.4 Evaluation of Internal Controls......................................................................10 SUTTER COUNTY INTERNAL AUDIT MANUAL 4.5 Internal Control Objectives ............................................................................10 4.6 Control Activities ...........................................................................................12 4.7 Materiality ......................................................................................................13 4.8 Evidential Matter ...........................................................................................13 Section 5.0 - Audit Planning ....................................................................................14 5.1 Introduction ....................................................................................................14 5.2 Types of Audits ..............................................................................................15 5.3 Annual Audit Planning ..................................................................................16 5.3.1 Audit Universe and Auditable Units ........................................................17 5.3.2 Risk Assessment Factors ..........................................................................19 5.3.3 Rating Auditable Department Risk Exposure ..........................................21 5.3.4 Submittal of the Annual Audit Plan .........................................................21 5.3.5 Changes to the Plan ..................................................................................21 5.4 Audit Project Assignments ............................................................................22 5.5 Audit Project Responsibilities .......................................................................22 5.6 Audit Project Planning ...................................................................................22 5.6.1 Audit Project Research .............................................................................23 5.6.2 Audit Notification Announcement ...........................................................24 5.6.3 Preliminary Interviews .............................................................................24 5.6.4 Flowcharts ................................................................................................25 5.6.5 Risk and Techniques Matrix ....................................................................25 5.6.7 Schedules ..................................................................................................27 5.6.8 Notification Announcement for Entrance Meeting..................................27 5.6.9 Entrance Meeting .....................................................................................28 5.6.10 Assignment of Tasks to Team Members & Coordination of Audit Assignments ......................................................................................................29 SUTTER COUNTY INTERNAL AUDIT MANUAL 5.7 Internal Audit Quality Assurance Guidelines ................................................30 5.8 Coordination with External Auditors .............................................................30 Section 6.0 – Audit Project Budgets, Schedule, and Time Reports ........................31 6.1 Introduction ....................................................................................................31 6.2 Audit Schedules .............................................................................................31 Section 7.0 – Audit Project Performance and Electronic Workpapers ....................32 7.1 Introduction ....................................................................................................32 7.2 Audit Evidence...............................................................................................33 7.3 Audit Techniques (Gathering Evidence) .......................................................34 7.3.1 Document Examination & Analysis ........................................................34 7.3.2 Interviews .................................................................................................34 7.3.3 Observations .............................................................................................35 7.4 Evidential Matter ...........................................................................................36 7.5 Sampling ........................................................................................................37 7.6 Conclusions ....................................................................................................38 7.7 Wrongdoings including Illegal Acts, Irregularities, Material Non- Compliance with Laws or Regulations, Waste, Fraud, Abuse, Defalcation, Corruption, or Mismanagement ...........................................................................38 7.8 Teamwork ......................................................................................................42 7.9 Electronic Data Processing Tools ..................................................................43 Section 8.0 – Nature and Purposes of Workpapers .................................................43 8.1 Introduction ....................................................................................................43 8.2 Workpaper Requirements ..............................................................................43 8.3 Physical Characteristics of Workpapers ........................................................44 8.4 Documented Work Performed .......................................................................45 8.4.1 Interview/Oral Evidence Write-Ups ........................................................45 8.4.2 Workpapers ..............................................................................................45 8.4.4 Progress Meetings & Status .....................................................................47 SUTTER COUNTY INTERNAL AUDIT MANUAL 8.4.5 Next Audit Memo ....................................................................................47 8.4.6 Cross-Referencing ....................................................................................48 8.5 Internal Audit Software Workpaper Sections ................................................48 8.5.1 Project Administration .............................................................................49 8.5.2 Audit Summary ........................................................................................49 8.5.3 Program Groups .......................................................................................49 8.6 Documentation of Supervisory Review .........................................................50 8.7 Workpaper Retention, Safeguards and Retention of Records .......................52 Section