Expert: Consuelo Herrera, International Accountant and Fraud Examiner - 2/16/2009

Question
Hello!!! I'm an Internal Auditor  of a Rural  Bank, I'm new in this field of work, I need some help to be able to enhance my ability in this kind of work..I hope you can help me...
I would like to ask on how to prepare an "Audit Plan" in a Microfinance Rural Bank? Do you have some samples that I can use as a guidance in preparing in an Audit Plan? Please help me...

Answer
Dear Lorena,

Thank you for contacting me.
Once you have obtained an understanding of the client and its environment your focus should be on developing an overall audit strategy that let you assess the risk of misstatements in the financial statements.

Considering the level of materiality let you to determine the appropriate scope of audit procedures. These procedures will help you detect material misstatements. Do not waste your time searching for immaterial misstatements that have no impact on the auditor's report.

Some suggestions in planning materiality are:

1. 5 percent to 10 percent of income before taxes
2. 1/2 percent to 1 percent of total assets
3. 1/2 percent to 1 percent of total revenues
4. 1 percent of total equity.

Once the materiality level has been determined the next step is to allocate materiality to individual financial statements accounts, which is referred as the amount of tolerable misstatement of the account.

Do not forget assess the inherent risk of material misstatement of the financial statements. This is considered in relation to management assertions about accounts and classes of transactions in the financial statements. The assertions are:

1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation and allocation
5. Presentation and disclosure.

You also must make inquiries regarding fraud and you need to think about risks by brainstorming with your team members and determine "what can go wrong"

An audit plan is an overview of the engagement that outlines the nature and characteristics of the client and its environment and the overall strategy. It includes:

1. Objectives of the audit
2. Timing and scheduling of the audit work
3. Description of the client company and its environment
4. Work to be done by other depts in the organization
5. Staffing requirements
6. Target dates for completing major segments of the engagement
7. Discussing the engagement among the team members
8. Significant risks of material misstatements due to error and fraud
9. Preliminary judgments about materiality levels.

SAS 99 is an excellent source of information regarding fraud in financial statements.

My best suggestion for you is to sign up for the Internal Auditors forum where you will find a wealth of information about the internal audit function. Please go to www.theiia.org

I wish you continued success in your professional endeavors.

Sincerely,


Consuelo Herrera, CAMS, CFE