Internal Audit2

8/2/2019 Internal Audit2

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in terna laud i t


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Training Programme Contents What is Audit ? (3)

Purpose of audit.(5)

Reasons of audit. (6) Terms in internal audit. (7,8) Types of audits. (9,10,11) Standards deals with audit. (12)

Preparing the audits. (13 to 21) Auditing techniques (22 to 30) Attributes of Auditor (31 to 32)


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What is Audit

Audit is a word which finds a reference to its use

even more than 200 years ago. It mainly referred

to as examination of accounts.

Audit at all times was mainly considered asverification of financial transaction with reference

to vouchers.

Auditee often considered this to be a policing activity.

The fear of getting non conformities reported was always

persisting. The result was Lack of information flow.


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What is Audit

As time changed, the approach to quality took a

new dimension.

Implementation of quality system further

enhanced this thought. Audit in a quality system

is no longer seen with a different eye. Internal Audit as defined in ISO : 9000 standard

A systematic and independent examination to

determine whether quality activities and related

results comply with planned arrangements and

whether these arrangements are implemented

effectively and are suitable to achieve objective.

INDEX


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Purpose of audit

To determine the conformity or non conformity of

quality system elements with specifiedrequirements.

To determine the effectiveness of the implemented

quality system in meeting specified qualityobjective.

To provide the audit with an opportunity to improve

the quality system.

To meet the regulatory requirement.

INDEX


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Reasons of audit

To evaluate a supplier where there is a desire to establisha

contractual relationship.

To verify that an organizations own quality management

system continues to meet specified requirement and is

beingimplemented.

To evaluate an organization own quality managementsystem

against standard.

Within the framework ofa contractual relationship, to verify

that the suppliers quality system continues to meetspecified

INDEX


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Terms in audits

Auditee Organization / Department / Section

being audited.

Auditor Person with competence to conduct

an audit.

Non Conformity The non fulfillment of

specified requirement.

Observation A statement of fact madeduring

an audit and substantiated by

objective evidance.


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Terms in audits contd.

Objective Evidence Data supporting

existence of something..

- Statement of facts

INDEX


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Types of audit

1. Internal orFirst Party Audit Internal audits arethose which are carried out by an organizationon its own department covered under thequality system by auditors who are independentof the area being audited. Through these audits

the management gets the feedback as to howthe system is functioning to achieve theobjective set in the companies quality policy.

2. External or Second Party Audit External auditsare carried out by an organization on premises

internal to its won. These could be audit on itsown supplier or sub contractor. Like internalaudit, the company may use its own resourcesor hire services of external agency.


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Types of auditcontd

3. Extrinsic or Third party Audit Independentaudit of organization to determine how well anorganization has implemented qualitymanagement system, its own system, product,specifications, for certification, ---- etc.

Adequacy Audit Whether the audits are 1st 2nd or3rd party, it is essential that the system beingaudited must have level of documentation toallow the audit to take place in the first instance.

The first step is, to establish that documentedsystem, in principal meet the requirement ofquality system standard against which thecompany is being audited is called adequacyaudit.


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Types of auditcontd

Compliance Audit It is in fact review of qualitysystem documentation against the applicablestandard to check that the system has beendesigned satisfactorily. The second stage ispractical audit called Compliance audit.

Vertical Audit If all applicable clauses areaudited in department or function.

Horizontal Audit During conducting a audit it iscommon practice to plan dept. by dept. auditwith the scope of audit.

INDEX


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Standard deals with audit

ISO / 10011 1 - 1990

IS / 14011 part I 1990

INDEX


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Preparing the audit

The approach to internal audit has to besystematic

It should be conducted according to preplannedschedule so that each applicable requirement of

the standard is addressed and all areas with anorganization are covered within a stupulatedperiod.

Within an organization audits are conducted onregular basis to check effectiveness of the quality

system.


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STEPS

Planning and scheduling the audit.

Preparation of the audit.

Performing the audit.

Reporting the audit result. Corrective action and follow up.

The need to perform an audit is determined bytaking into account specified &/or regulatory

requirement.

Preparing the auditcontd


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Planning and scheduling the audit.

The following parameter are considered while decidingthe audit planning and schedule.

- The audit plan shouldbe approved by M R andcommunicated to the auditors and auditee.

- The audit plan shouldbe designed to be flexible in order topermit effective use of resources.

-The audit plan should cover all departments / functionsaffecting quality.

- Identification of the reference documents.

- Identification of the individual having significant directresponsibilities regarding the objective & scope.

- The date and place where the audit is to be conducted.

- The expected time and duration.



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Preparing the audit.

- Each auditor should be assigned specific quality systemelement or functional department to audit.

-The document required to facilitate the auditors investigationand documents report results.

- Check list for evaluating quality system elements.

- Forms for reporting audit observations.

- Forms for documenting supporting evidence for conclusionreached by the auditors.



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Audit Check list - is a set of questions to be asked and points

to be probed during the audit.

- It may contain space for writing the

observation and findings.

Advantage of audit checklist are -

- It keeps all notes together.

- Acts as a guide and gives direction for audit.

- Ensure complete coverage of scope.

- Helps in time management.



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Performing the audit.

- Evidence should be collected through examination ofdocument and observation of activities and conditions in thearea of concern.

-Clues suggesting non conformities should be noted if theyseen significant, even though not covered by check list and

should be investigated.- Information gathered through audit should be verified byacquiring the same information from other independentsources, such as physical observation, measurement andrecords.

- All audit observation should be documented.



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Reporting the audit result.

- The audit report should be faithfully reflect content of audit.- It should be dated and signed by the auditor and auditee.

-It should reflect identification of the reference documentagainst which the audit was conducted ( Quality systemstandard, Quality Manual, ---- etc. )

TYPES OF NCR

Major Non conformity

Absence of OR total breakdown of system.

- Number of minor nonconformities against one

requirement- Any NC that would result in probable ship of NC product.

Minor Non conformity

- A single observed lapse in complying to QMS



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Corrective action and followup..

-The auditee is responsible for determining and initiatingcorrective action needed to correct non conformity or tocorrect the cause of non conformity.

- Corrective action and subsequent follow up audit should becompleted within a time period agreed to by the auditor andthe auditee in consultation with the M. R.

Note During audit process following meetings areconducted.

Opening Meeting - For introduction, purpose of audit,

Scope of exclusion, Review of the

programme, Guide facility, --- etc.

Closing Meeting - Conclude audit, summary report,

CA / PA Plan, clarification and thanks

to organization.

Preparing the auditcontd INDEX


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There are no specific guidelines in ISO : 9000series to the way in which the assessment team willcarry out the task of critical appraisal of systemthrough interviewing people.

The person we wish to interview will range from

very senior executives to the people who actuallycarry out day to day activities in the organisation.

We need to be aware of not only of them, who wewish to see , what we are trying to establish andtherefore which question is ask, but we need also to

be aware of the psychological aspects of thisprocess.

Auditing Technique


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It is essential that the auditor at all times remain

professionals and one of the means by which this canbe demonstrated effectively is the way in whichdifficulties are handed.

Though professionalism is difficult to define tangiblybut it can be achieved through

Correct appearance and approach to the auditee.

Total knowledge of the subject. Tactful and diplomatic when difficulties are

encountered.

Auditing Techniquecontd.


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.

Auditing Techniquecontd

For an effective interview it will be essential to

extract necessary information in the shortest time

and not to distrub the work of the auditee. This

could be achieved by interviewing the right people,

making the auditee relaxed. A first step towards a successful audit is to arrive

on time, introduce yourself with the auditee and

spend a short period of time to gain confidence and

trust of the people.

It is therefore necessary that the right type of

question is only asked.


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.

Auditing Techniquecontd The most suitable types of questions are those

which ensure that the persons answering themexplains what is happening and the reason for that

type of activity. Rudyard Kipling's seven best

friends can be used to explain.

WHAT

WHERE

WHEN

WHY

HOW

WHO

SHOW ME


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.


The last question is used to verify and check if

what is said and being done is correct and is being

done consistently.

The type of question which the auditor should

avoid are Posing closed questions like -'Do you do it ?' ,

'Is it done like this?'

Such questions would usually result in answers

like 'Yes' or 'No' and would not tend to provide

further details.


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.


Posing and answering own questions.

In case the questions are like ,'I hope you do it like _______ '

I presume in case of problem, you take ____ action.

Such questions would feed the answers to

auditee's mouth.

Not given sufficients time to the auditee to

respond. Many times too many questions areasked by the auditor and the auditee is

unable to reply them in given time frame.


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.


Not asking the relevant questions and spending

most of the time in discussing irrelevant matters.It should be remembered that auditors and

auditees are both human and have a clear

understanding of what they are trying toachieve. Auditors must learn to listen with the mind as

well as ears. Some of the do's and don'ts are

listed in the next slide.


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.


DO'S

Talk to person who does the job. Talk to language of the auditee.

Speak clearly.

Rephrase the question if not understood.

Be relaxed. Be human.

Be courteous.

Display interest in the auditees and their work.

Act professionally. Be on time.

Be well prepared.

Seek evidence to verify comments made.


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.

Auditing Techniquecontd.

DON'TS Don'ts talk down.

Don't confuse - ask one question at a time.

Don't argue.

Don't waist time.

Don't get carried away with flattery.

INDEX


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An Auditor should be.

Ethical i.e. fair, honest, truthful.

Open minded i. e willing to consider others views.

Diplomatic i. e. tactful in dealing with people.

Observant i. e. aware of physical surroundings.

Versatile i. e. adjusts readily to different solution.

Decisive i.e. reaches timely conclusion based on logical

reasoning.

Self disciplined.

Good listener.

Attributes of Auditor


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How to write NCR

Findings :- At Final Inspection for Panel 110 Dimn. 111.00


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Thanks

Documents

Internal Audit2