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ARCHIVED - Horizontal Internal Audit of High Risk Expenditure Controls in Large Departments and Agencies


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Audit Objectives, Scope and Approach

Objectives and Scope

The objective of the audit was to assess the adequacy and effectiveness of processes in place to identify higher-risk transactions, which consequently enable more efficient account verification practices.

For the 18 large departments and agencies (LDAs) included in our audit, we looked at risk management over expenditure controls, whether policies and procedures were designed to respect risk management principles, whether the controls designed were commensurate with the risks, and whether appropriate monitoring mechanisms were in place.

Audit Approach

The audit was conducted in two phases. Consultants were engaged to support the Office of the Comptroller General audit team in both phases.

Phase 1

To select the LDAs to be included in the audit, we performed a risk analysis that used findings from previous horizontal audits and considered the centralization or decentralization of the LDA's financial function, the nature of its business, and its size. We also ensured that the selected LDAs accounted for a significant volume of expenditures from a government-wide perspective. On the basis of this analysis, we chose the 18 LDAs listed in Appendix 1. These LDAs account for more than 35% of total government expenditures.

Phase 2

For each of the 18 LDAs, we carried out a document review to identify systemic strengths and weaknesses. Our review included documentation on risk, quality assurance and monitoring plans, and other departmental policies or procedures developed for expenditure management.

On the basis of our findings, we selected eight LDAs at various stages in the development and implementation of an account verification policy for further examination. For these LDAs, we interviewed managers from all parts of the expenditure management process including senior financial officials, and managers and project authorities responsible for account verification, to determine whether procedures were consistently understood and carried out.

We also performed transaction testing to verify whether policies and procedures for account verification of high-risk transactions were being applied as intended. In total, 125 transactions from the period October to December 2008 were reviewed in order to determine whether the established procedures were being followed by responsible officers.