INTERNAL TO INDEPENDENT AUDIT

An independent audit of the town of Cicero, N.Y., justice department found that thousands of dollars were missing from the town court and that records were incorrect, according to an article published in The Post-Standard. The town supervisor — then new to the position — had hired a certified public accountant to conduct the audit after an internal audit by the town comptroller discovered discrepancies in the department’s records, such as documentation showing that US $11,500 in bail money was refunded to defendants but never recorded as deposits against their cases. The audit report questioned US $3,475 in transactions, including $850 in payments to the state for small claims.

Lessons Learned

I find this case interesting for two main reasons. First, I am reminded once again that every organization is susceptible to fraud. I often hear from people working in government or nonprofit organizations that fraud is a private-sector risk, but they are proven wrong every day by another fraud committed when the opportunity presents itself. Second, this case demonstrates how management and internal auditing can work together to protect the organization.

Everything worked the way it should — the way it often doesn’t. Management worked with internal auditing to determine the nature and extent of the problems. Internal auditing maintained an open and objective perspective by questioning and verifying the facts. In the end, there were numerous instances of bookkeeping errors that — had they continued — would have rendered the town government ripe for fraud. Instead, a stronger control framework is now in place and future opportunities for fraud have been reduced.


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Internal to Independent Audit
Many organizations often treated internal auditor as internal checker. This is a great problem for internal audit for independent review. It is also internal auditors’ duty to aware higher management about differences between internal check and internal audit. Auditing is obviously differs from checking. If internal auditors conduct routine checking, it will reduce professional skepticism, reduce analytical audit procedures and helps to increase fraud risks.
Posted By: Muhammad Reza Kabir
2011-09-07 6:32 AM


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