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Advanced Auditing

Notes  Run W-9s against the IRS TIN (Taxpayer Identification Number) Matching Program
before making the first payment.

 Check to see if duplicate vendors have the same TIN.
 Do some sort of verification of new vendors, checking TIN and phone numbers to
ensure you are not dealing with a phony vendor.

 Use coding standards for master vendor file data entry and be suspicious of vendors
with similar names.

 Have a corporate policy restricting transactions with company employees unless
there is a specific written contract approved by senior management not involved
with the case.

 Require dual approvals before a new vendor is added to the master vendor file.
Be wary of executives who request or require access to everything. This makes fraud all
the easier to commit. No employee should have such access, regardless of their level
within the organization. Remember, trusted employees are the ones who are most likely
to steal from you successfully - so put safeguards in place to ensure it doesn't happen on
your watch.
Conclusion
While very few organizations will employ all the practices described above, the more you
can incorporate into your policy and procedures, the more difficult it is for a fraudster
(either an employee, former employee or someone else) to steal from you.

Question:
How many of these practices are in place in your organization?

Source: http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/
Articles_2009/CorpFin/IntControls_Breakdown.jsp

5.9 Summary

 Internal controls, even if fairly simple, helps in enhancing the confidence level of the
auditor.
 The most important objective in studying and evaluating internal control system is to
establish the reliance an auditor can place on the system in determining the nature, timing
and extent of his substantive auditing procedures.
 Two most common techniques of internal control evaluation are the flow charts and the
internal control questionnaires.
 The flow charting technique is an important technique for evaluation of the internal
control system. It is a graphic presentation of internal controls in the organization and is
normally drawn up to show the controls in each section or sub section.
 A sound knowledge of internal control requirements is essential for adopting flow charting
technique for evaluation of internal controls, also it demands a highly analytical mind to
be able to see clearly the inter division of a job and the appropriate control at relevant
points.
 A questionnaire is a set of questions framed in an organized manner, about each functional
area, which has as objective, the evaluation of the effectiveness of control and detection of
its weaknesses, if any.

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