Auditing for Managers The Ultimate Risk Management Tool KH Spencer Pickett Jennifer M Pickett 0470090987_01_prea01.fm Page iii Thursday, November 25, 2004 9:27 AM 0470090987_01_prea01.fm Page iii Thursday, November 25, 2004 9:27 AM Auditing for Managers 0470090987_01_prea01.fm Page i Thursday, November 25, 2004 9:27 AM 0470090987_01_prea01.fm Page ii Thursday, November 25, 2004 9:27 AM Auditing for Managers The Ultimate Risk Management Tool KH Spencer Pickett Jennifer M Pickett 0470090987_01_prea01.fm Page iii Thursday, November 25, 2004 9:27 AM Copyright © 2005 K.H. Spencer Pickett Published by John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone (+44) 1243 779777 Email (for orders and customer service enquiries): cs-books@wiley.co.uk Visit our Home Page on www.wileyeurope.com or www.wiley.com All Rights Reserved. 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Library of Congress Cataloging in Publication Data Pickett, K.H. Spencer. Auditing for managers:the ultimate risk management tool/by K.H. Spencer Pickett, Jennifer M. Pickett. p. cm. Includes bibliographical references and index. ISBN 0-470-09098-7 (pbk.:alk. paper) 1. Auditing, Internal. 2. Risk management. I. Pickett, Jennifer M. II. Title. HF5668.25.P528 2005 657′.458—dc22 2004021737 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 0-470-09098-7 Typeset in 10/12pt Palatino by Integra Software Services Pvt. Ltd, Pondicherry, India Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production. 0470090987_01_prea01.fm Page iv Thursday, November 25, 2004 9:27 AM This book is dedicated to our nephew, Daniel Harrison ‘Lift up your head and hold it up high’ 0470090987_01_prea01.fm Page v Thursday, November 25, 2004 9:27 AM 0470090987_01_prea01.fm Page vi Thursday, November 25, 2004 9:27 AM Auditing For Managers The Ultimate Risk Management Tool The initial audit process is called ‘A4M.99’ and is based around 11 statements and 88 key values that underpin the Auditing for Managers resource. 0470090987_01_prea01.fm Page vii Thursday, November 25, 2004 9:27 AM 0470090987_01_prea01.fm Page viii Thursday, November 25, 2004 9:27 AM [...]... that have an impact on their ability to perform and conform In this way the information received by the board (or management team) comes straight from the horse’s mouth The idea is that the formal audit process may well change its focus away from checking the performance reports and level of compliance, and more towards the way that management itself reviews these matters Summing up the book Figure 1.2... approach to initial auditing is based on 11 statements and 88 values and is known as Auditing for Managers (or for short, A4M.99) Introduction A4M 1.1 Auditing should be considered by all managers as a powerful tool 4 for reviewing the adequacy of their governance, risk management and internal control arrangements Figure 1.1 shows how the book is put together Chapter 1 deals with the audit concept,... in the marketplace This in turn is aligned to the corporate results, where there is either weak or strong performance over the year The way the organization responds to risks is important A weak performance and poor standing in the marketplace call for a focus on change strategies to close this gap Risks are seen as forces that are stopping the organization scoring more goals than it is conceding The. .. manager to the debate and suggests an empowered approach to self -auditing, using a simple, toolbox-based style The empowered approach is called auditing for managers and is based on 11 statements and 88 key values that are set out throughout the main sections of the book We have given the model a shortened name of ‘A4M.99’ (initial auditing) The hope is that these values will help managers and their staff... discussed with the business manager before the audit is started and will focus on the adequacy of risk management and internal control, while consulting services tend to be performed on request from a particular manager and the terms of reference will be developed by that manager Whatever the format, there is always scope for a manager to be involved in discussing the terms of reference for an audit... Board The board reports back to the stakeholders in line with the formal arrangements that are in place to ensure this happens For private-sector companies this really means they report to the shareholders and the marketplace For public-sector bodies, the accountabilities are to the public through 0470090987_02_Cha01.fm Page 6 Thursday, November 25, 2004 9:27 AM 6 Why auditing? Stakeholders Board Formal... reviews commissioned by the manager, while team initial audits in Chapter 6 involve work teams in assessing their own risks and controls The 0470090987_02_Cha01.fm Page 2 Thursday, November 25, 2004 9:27 AM 2 Why auditing? 1 Why auditing? Describes the concept of auditing 2 Corporate governance context The big picture – corporate governance 3 Concepts of risk Key aspects – risk and risk management 4 Different... book For readers who need a short-cut to auditing for managers, then this figure is all that they need to make progress The problem for those who now wish to put down the book is that you will have not yet covered how to carry out these initial audits Accordingly, you are invited to read on Different levels of management Directors tend to have a good appreciation of the audit process and more senior managers. .. 2004 9:27 AM Contents Abbreviations 1 Why auditing? Introduction Why auditing? External auditing Internal auditing Compliance auditing Fundamental components Common mistakes Check your progress Newsflash – read all about it The key messages 2 The wider governance context Introduction The accountability dilemma Corporate governance The ethical platform The risk management concept: roles and responsibilities... external and internal risks The first organization with poor results is not in full control, while the good performer has been able to address these risks much more effectively The audit process can help focus minds on reviewing risk and determining whether or not processes are up to the job A credibility gap The auditors have an important job to do, as do line management and work teams The auditors are . AM 0470090987_01_prea01.fm Page vi Thursday, November 25, 2004 9:27 AM Auditing For Managers The Ultimate Risk Management Tool The initial audit process is called ‘A4M.99’ and. as Auditing for Managers (or for short, A 4 M. 99 ). A4 44 4M 1.1 Auditing should be considered by all managers as a powerful tool for reviewing the