December 2013

Request for Delay

 

A security company's CAE considers whether to accommodate management's request to defer a planned audit engagement.

 

By Dennis McGuffie

 

John Mooring is the director of internal audit for Norex Security Operations Inc., a large provider of security monitoring services for business and residential clients with locations throughout North America and in some European countries. John has established well-documented pre- and post-audit routines, with which his staff is very familiar. To efficiently execute against its audit plans, the audit department’s projects must be scheduled months in advance. The auditors submit requests for information (RFI), along with notice of audit, a month before on-site fieldwork is planned. Responses to the requests are returned to John’s office, and the staff can complete much of the audit program at their desks.

 

One of John’s audit teams recently sent a notice of audit and RFI to one of Norex’s regional offices. A few days later, John received an email from the divisional senior vice president responsible for the region to be audited. The email read: 

John,
 

I understand your group is planning an audit of the Southern regional office next month. I wanted to let you know that there have been some recent organizational changes in the office. I think it would be better if we deferred the audit until we are able to get some of the organizational holes plugged. Additionally, we have been notified that the state has scheduled an on-site review for the same week your auditors were planning to be in the field. 

I will keep you posted on our progress and let you know when I think we’ve got things squared away.

Please contact me if you would like to discuss.
 
Marcus T. Price
SVP, Southern Division
 

John followed up with a phone call to Marcus, who explained that he believes an audit at this point would just delay several of the changes they have in progress. He said it would result in the auditors “just writing a report that tells us what we already know and are in the middle of correcting.” Marcus continued: “The audit would really add little value, and I think the delay is the right way to go. Besides, the team is pretty overwhelmed right now preparing for a visit from the state auditors.”

John tells Marcus he will consider the delay. He understands the points that Marcus has made and wants to be sure his group is considered a value-added function. And given the current conditions Marcus described, an internal audit could cause even further disruption. On the other hand, if the situation is that bad doesn’t John have a responsibility to report it to executive management and the audit committee?

 
Share your comments below.

 


Request for engagement delay
John should get a comprehensive understanding of changes taking place at Norex's regional office, and specifically how these changes impact on the strategic risk/s that had influenced the inclusion of the regional office in the audit plan in the first place. If the results of the analysis of these changes indicate that more value would be added if the audit is carried at a later date, then John must re-schedule accordingly.
Posted By: Keketso
2013-12-11 6:21 AM
What action is being taken?
Marcus stated the visit would result in the auditors “just writing a report that tells us what we already know and are in the middle of correcting.” I think my question would be, "Can you let me have details of what you already know, the action you are taking and when the action will be complete?" John can then judge whether a visit is necessary and, if he considers it unnecessary, he can present this "evidence" to the audit committee as part of his report.
Posted By: David Griffiths
2013-12-10 5:29 AM
delay audit
After speaking with senior management, I'd be jumping on the next plane.
Posted By: William Hugh Cochrane
2013-12-05 4:32 PM
An opportunity to leverage work is possible
I think they can leverage the State's work at this point. However, I think they should promptly perform a review once the State's auditors are finished.
Posted By: SBP
2013-12-05 3:42 PM
A request for delay
I believe that Ia can delay its visit given the challenges that the regional office is facing. If Ia believes it can place reliance on the work of the state auditors, then it can use those results to help inform its plans for the office. The regional office should, in the meantime, document its challenges in correspondence to Ia.
Posted By: Andre R Estwick
2013-12-05 3:32 PM
Delaying Audit
If I were in John's position, I would agree to a reasonable delay, with no additional extensions. The delay and the reason for it would be included in my next report to the Audit Committee and Management. If I had serious concerns, I would discuss them with the Audit Committee Chair prior to granting the delay.
Posted By: Debra Yoshimura
2013-12-05 1:39 PM
Delaying Audit
If I were in John's position, I would agree to a reasonable delay, with no additional extensions. The delay and the reason for it would be included in my next report to the Audit Committee and Management. If I had serious concerns, I would discuss them with the Audit Committee Chair prior to granting the delay.
Posted By: Debra Yoshimura
2013-12-05 12:49 PM
Request for Delay of Audit
More information is needed with respect to what is meant by "what we already know and are in the middle of correcting". IA needs to to get a sense of the seriousness of the issues. If these issues present serious risk to the organization, then perhaps IA should not delay. In addition, has the Department SVP communicated these issues to executive management, if so, who? IA should follow up with executive management to gauge their understanding of the issues and the risk presented. If executive management has not been informed,then why not? IA should then also consider whether the issues should reported. As to the state auditors, this is really not an issue. IA could move up their audit by a week or so. The organizational changes really don't present an issue, depending on what is going on. Company organizational changes occur all the time and typically do not present an obstacle to IA. The decision to delay an audit should be based on the importance of the issues alluded by the SVP of the department and executive management's knowledge/concern with the issues.
Posted By: Robert Waters
2013-12-05 8:54 AM
Audit Review Delay
I would ask for a list of what issues they have identified accompanied with a work plan to resolve the known issues. I would share that with the Audit Committee and the Executives as justification to 'delay' the internal audit. This gets to the seriousness of their action; not simply a request for a delay. Dan
Posted By: Dan Schlegel
2013-12-05 7:24 AM
Audit Review Delay
I would ask for a list of what issues they have identified accompanied with a work plan to resolve the known issues. I would share that with the Audit Committee and the Executives as justification to 'delay' the internal audit. This gets to the seriousness of their action; not simply a request for a delay. Dan
Posted By: Dan Schlegel
2013-12-05 7:24 AM
Request for delay
I understand this is a partnership and we should work collaboratively however I feel it's an opportunity to provide perhaps additional insight for John's organization. I also feel that while the state is there for an on-sight review, here's another opportunity to leverage material and in the long run this could potentially be less work for John's team.
Posted By: Beth Newton
2013-12-03 12:04 PM
comment on a request for delay
A request for delay based on Mr. Price's reasoning is concerning. Also, will Mr. Price want to delay audits anytime the organization is undergoing changes in the future? A denial for the request of delay would be the professional and ethical route to go.
Posted By: Juanita Ludtke
2013-12-03 10:16 AM


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