5.8-1 INTERNAL AUDIT PROCESS

Policy

This University has established and supports an Internal Audit Department as an independent appraisal function to examine and evaluate University activities as a service to management and the Board of Control. The Internal Audit Department has direct access to the President of the University, meets with and coordinates communication with the Finance and Audit Committee of the Board of Control, and is administratively supported by the Office of the Vice President for Administration and Business Affairs.

To accomplish its assigned responsibilities, the Internal Audit Department has full access to all University records, properties and personnel, except those exempted by law or University policies, relevant to the subject under review, and is free within the scope of the functions assigned to Internal Audit to review plans, systems, procedures and records.

While performing audits, the following standards will be used:

  1. The State Manual for Uniform Financial Reporting for the State of Michigan Colleges and Universities.
  2. The National Association of College and University Business Officers (NACUBO) reporting and operating requirements of financial affairs for higher education.
  3. The requirements of the American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Standards Board (FASB).
  4. The requirements of the federal government applicable to grants, projects, contracts, etc.
  5. The Code of Ethics and Statement of Responsibilities as adopted by the Institute of Internal Auditors (IIA).
  6. The policies, bylaws and actions of the Board of Control of the University.

Objective, Scope and Functions

The objective of Internal Auditing is to assist members of the University in the effective discharge of their responsibilities, and to promote effective controls by furnishing them with analyses, appraisals, recommendations, and information concerning the activities reviewed.

The scope of Internal Auditing encompasses the examination and evaluation of the adequacy and effectiveness of the University system of internal control and the quality of performance in carrying out assigned responsibilities.

In performing its functions, the Internal Audit Department has no direct responsibility for, nor authority over, any of the activities which it reviews. Therefore, the Internal Audit Review Appraisal does not in any way relieve other units in the organization of the responsibility assigned to them; nor are its audits binding on these units. They constitute the auditor's professional opinion about the practices and/or procedures being reviewed.

The functions of the Internal Audit Department are to:

  1. Review units within the University at appropriate intervals to determine whether effective and efficient accounting and fiscal controls are applied to assure sound fiscal management.
  2. Determine the adequacy and effectiveness of the University's system of internal accounting and operating controls.
  3. Review the means of safeguarding assets and, as appropriate, verify their existence.
  4. Review the reliability and integrity of financial and reporting information, and the means used to identify, classify and report such information.
  5. Review the established systems to ensure compliance with those policies, procedures, laws and regulations which could have a significant impact on the University's fiscal condition, and determine whether the University is in compliance.
  6. Recommend improvements and identify opportunities to better utilize resources and to be cost effective.
  7. Review the operation of computer/based systems to determine if adequate controls are incorporated in the system, and documentation is complete and accurate.
  8. Develop an audit approach which supports and complements external audits.
  9. Prepare an annual audit plan.
  10. Prepare an annual report on the audits completed, and actions taken on audit findings and recommendations.
  11. Conduct special audits as requested by the President of the University or the Finance and Audit Committee of the Board of Control.

1If the Internal Auditor during the course of the audit learns what that person deems is any serious impropriety, the Internal Auditor, upon notifying the appropriate member of the Executive Committee and the President, may inform the Finance and Audit Committee at the earliest opportunity.

Internal Audit Response

Each response to an audit comment/recommendation is to be placed on a separate sheet of paper in typed form.

The following format should be used:

Example

Title or subject under review

Audit Comment/Recommendation (repeat from audit report)

Audit Response

Responses should be submitted in the following format:

  • We agree with the auditor's comments, and the following action will be taken on…; to improve the situation…; or
  • We agree with the auditor's comments, however, under the circumstances [describe], we cannot comply because…; or
  • We disagree with the auditor's comments because… and, therefore, will not comply with the recommendations; or
  • We agree with part and disagree with another part [describe each part and reason(s), give action to be taken].

 

 

 

Adopted 5/5/89 EC JAW
12/2/98