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#108441 - 08/21/03 05:38 AM Change the Audit Rating
Anonymous
Unregistered

Did you ever encounter a General Manager requesting the audit rating for his department to be re-visited?. Can we change the audit rating once the report is issued and circulated? In my opinion, once the report is discussed, finalized and issued, the audit rating should not be changed. Or the audit department could have a policy that if a department falls under Marginally Satisfactory rating, thebGeneral Manager of the Business Unit has to be informed before the issuance of the report.

I really would like to have your thoughts on this, I am stuck with a General Manager requesting the audit rating for his departments to be re-evaluated while the reports are already issued and the reports were only discussed with his line Management. What should I say to him?

Thanks

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#108442 - 08/21/03 03:24 PM Re: Change the Audit Rating
Countess Kiwi Offline
Diamond Poster
Joined: Jun 2002
Posts: 1,815
Minnesota
Did you route an audit report to management? Did they initial the report? Did they question the rating? Are audits considered in the GM performance evaluation?

Our audit findings/ratings are going to be included in annual reviews and I anticipate issues such as yours going forward, but if management has signed the report they agree to it. I include the audit rating in the final report and it is routed to executive management and the managers of the areas involved and it must be initialed by everyone. Any issues are noted on the report by each individual. The routed report is then sent to audit committee. IMHO in this type of situation I would send the final report to audit committee and in the letter indicate that the manager has requested a change in rating and get their thoughts on the matter prior to doing any adjustments.
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#108443 - 08/21/03 03:30 PM Re: Change the Audit Rating
Risk Officer Offline
100 Club
Joined: Apr 2001
Posts: 205
Dallas
Your post touches on several issues.

First, communication. While I am not privy to your organizational chart, the fact that the General Manager is expressing such an interest in the audit report / rating would lead me to believe that he/she should have been involved, if only at a high level, throughout the audit and especially during the wrap-up phase. For anyone directly involved with the area under audit, there should never be any surprises presented in the final audit report. Both the findings and ratings should be discussed with management at the conclusion of the exam, and a draft report should be issued to management for their review prior to finalizing the report. These procedures will generally prevent surprises from happening.

Second, I would agree that if the audit report has a below satisfactory rating, the draft report distribution list should be expanded up the chain...depending upon the severity of the audit rating and noted deficiencies, even up to the President / CEO. Again, no surprises when the final report is issued.

In regards to changing the rating once the report is issued, my answer would be it depends. If the General Manager brings information to the table (things that existed or were in place during the audit, and maybe the line managers just didn't tell you about it) or brings a different perspective to you that results in your changing your mind, I don't see a problem with reissuing the audit report. Improved communication should make this unnecessary in the future.

If, on the other hand, things have changed since the audit, new controls or other types of corrective action, I think it would be appropriate to upgrade the area's rating (especially if the rating was less than satisfactory). This would not require you to reissue the audit report; the report as "accurate" as of the audit date. You could handle this with a memo or other documentation and just change the rating in your risk assessment and / or other summary documents. The main reason I think this would be appropriate is that auditing and the audit schedule should be flexible and based on risk; you need current, up to date risk assessments and ratings to do this.

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My opinions are just that...my opinions.

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#108444 - 08/21/03 07:00 PM Re: Change the Audit Rating
Patti Offline
New Poster
Patti
Joined: Feb 2003
Posts: 5
Kansas
Risk Officer, I agree with you. In our organization, we complete our audit fieldwork and try to discuss issues and findings as we go. That way there are no surprises when we have the exit meeting. We issue a working draft report and the "auditee" has a 10 day response time to again verify the facts and review their response. They can also let us know any corrective action that has been completed. The "draft period" allows for any discrepancies to be addressed and worked through. Our president requires the division manager and appropriate supervisor/personnel to sign the working draft report. Their signature documents they have agreed to the ratings, deadlines, etc. Then of course the final report goes to the audit committee of the board. In our shop, we find this to be a pretty good approach.

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#108445 - 08/23/03 06:22 PM Re: Change the Audit Rating
Joe Offline
Member
Joe
Joined: Aug 2003
Posts: 74
Overseas
Thank you so much, Risk Officer, for your input. The argument of my auditors is that the problem is not with us as auditors, the problem with the communication line between the line management and the general manager. The line management should involve their general manager in the audit i.e. inform them about the outcome of the audit etc. I guess the General Manager only get involved when there is an adverse audit rating. Do you discuss your reports at the GM level or only settle with line management? As for us, the GM doesn’t get involved at all.

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#108446 - 08/25/03 01:28 PM Re: Change the Audit Rating
Risk Officer Offline
100 Club
Joined: Apr 2001
Posts: 205
Dallas
One size does not fit all...therefore, my recommendation would be to find what works best for your bank. I would start at the Executive and GM level and just ask them what their expectations are in regards to communication. You might even do a short "communication" survey to see what their opinions / expectation are. When do they want you as auditors to pull them into the loop?

In our bank ($500MM+), most issues get resolved at the department head level, with major issues going to the EVP/CFO. Lending problems, however, go all the way to the CEO and the President (they carry the largest portfolios in the bank and lending is near and dear to their hearts). Just find the process that works for you and stay with it.
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My opinions are just that...my opinions.

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