Accounting Features

A governance audit is an on-site verification process, such as an audit or inspection of the processes that govern a formal organization. The form of audit is applied company-wide and influences the decision-making and interaction processes between the parties involved in collective issues that lead to the strengthening, creation or reproduction of social norms and institutions. Governance audits serve a variety of purposes. Certification, verification of compliance, and follow-up. Companies are adventurous companies that have to meet certain requirements, such as the European Conformité Europeënne Mark (CE Mark) requirements in Europe (Mellis 1999, pg. 456). Sometimes, customers may demand their suppliers to conform to the ISO 14001, safety criteria, ISO 9001 or the federal regulation. Hence, an immediate auditing is done. Secondly, another essential purpose to the governance auditing is for compliance and conformance. They are aimed to check the management, added value, continual improvement and the development assessment. Sometimes, the organization may need to rectify the efficiency of the organizations’ activities if there is any problem, hence, governance auditing may be essential at this particular juncture. Another fundamental purpose of the governance auditing is for follow-up. The system, process and product audit findings may require corrective action. The audit may be done after the primary activity for the verification after the corrections are made. The audit is made based on the risks and importance of the findings. The follow-up may be as a result of the performance issues which may demand an immediate audit (Wright 2006, pg. 345).

Governance auditing is an essential and useful for various organizations such as the IT, healthcare, non-profit, financial, and environmental companies.

Non-profit organizations

The organizations are born from the service as well as giving. The managers are tasked with the role of consistently promoting the beliefs and passion to the individuals, community as well as to the employees. Despite the organization failing to make any profits, there is always need to account and manage finances efficiently (Scott 2011, pg.345). The governing audit is essential, and it is required by the granting agency, sponsoring organization and board of directors. The governing audit provides peace of mind and assurance that the financial report is transparent, accurate and the management complies with the rules, principles, and regulation set by the organization. The governing council is motivating to the donors in giving an extra dolor due to the confidence they have over the use of the contributed fund. The audit is also critical in helping the management to make more informed decision, accurate and enables in taking a direction that is in line with the firm’s mission. Also through the governance auditing, the nonprofit organization can generate more informed decision which adds value to the auditing process. The governance audit may seem to be unnecessary, but they generate valuable results. Most of the time, the organization use the finance committee or other bodies to examine the process of governing as well as the compliance with the organization’s budgets, rules, and the regulations.

The importance of the governing audit in non-profit organization

• They examine the internal control structure of the organization

The internal control can be defined as the balances and the checks in the accounting systems which are meant to detect any errors or misstatements. The internal control must be done to avoid any issue which may affect the governance of the organization. They are designed to be extremely important and may enable the organization to identify the areas of vulnerability, weaknesses and provide recommendations to the internal controls. The governance audit may help in improving the compliance with the financial use in the organization.

• Review of the financial documents such as the cash receipts, payroll reconciliations, disbursement and the year-end bank

The review of the documents internally gives the individuals, stakeholders, employees and the donor’s confidence that there is the proper use of the resources. They should be done on the recurring basis to ensure they are accurately recorded as well as accurate. The proper auditing will show whether the agreed rules on the use of resources are properly followed to the letter.

• Data-mining, analytics and vendor analysis in conducting the unusual activity search

The software can be used in the analysis of the general ledger activities for a particular period. The data is summarized, analyzed and sorted for the generation of meaningful results which are helpful for the organization. The analysis will be able to identify where the errors have been done.

Hence, governance auditing is essential to non-profit organizations in ensuring the stakeholders are satisfied with the use of their donations. The satisfaction will also come from the knowledge of the proper management which is as a result of proper following of rules and the set principles.

IT organization

In an organization, everyone is asked to follow the policies and to protect any cyber crime effects. The plans for the cyber security are well organized, tested and flawlessly executed. Hence, one needs to ensure they take responsibility actually.

Boards and management are quick to recognize changes in risk and technology, and promptly act to modify plans, as needed. Cyber security efforts are supported and strengthened by a healthy organizational culture. The organizations are supposed to monitor their policies, programs, and practices for the cyber security; therefore, for one to do it efficiently, the governance audit is essential. Immediately after the creation of the cyber security plans, the governance audit needs to be done for testing the efficiency and effectiveness of the protocols and controls which assure the management of its protections (Goodwin 2006, pg.390).

The key focus of the audit:

• In assuring response and readiness

The governance auditing is helpful to the organization for the testing the disaster-recovery plans, business continuity as well as the review and test of the cyber security. With the trial of the plans, one can manage their resources efficiently since less is wasted on the cyber security (Goodwin 2007, pp. 195).

• Communicating with the executive management and board on the risk levels as well as how to address them

The governing audit in the organization can inform the risk posed by the cyber attack, help and choosing the best techniques to mitigate them.

• Ensure coordination and communication

One of the main advantages of the governance auditing is to allow efficient communication and coordination among different departments. Due to the effectiveness and well-sourced audit function from the perspective of the organizational needs, there is improved coordination and communication pertaining the cybercrimes across the organization.

• Work collaboratively with the IT department as well as other agencies in building effective Defence and responses

Cyber risk is the entire body problem which should be handled by all. The audit is modified, magnified and mystified by the IT systems. Hence, when the governance auditors build collaborative, strong relationship with the IT personnel, the responses and the mitigation effort for the reduction of the cyber crime are useful.

Hence, the IT department is essential for every organization in ensuring that all the cyber crimes are mitigated to the minimum. The audit work with the team in building the cyber-resilience plans. The following are the essential plans

Resist

It is wise to instruct the employees on the etiquette which are the cyber detective and instruct the auditors to test for its compliance. Also, it is advisable to test the IR controls regularly. Also, the auditors must ensure that the software is data is well updated.

React

For the effective business-continuity management, a crisis-management plan is essential to eradicate cyber breach. The method involves the immediate assessment of the breach and methods that solve it. Secondly, is ensuring that the organization communicates transparently with a single voice. Thirdly, is to ensure that business understands and carries out the business-continuity plans and crisis-management. Finally, the governance audit should monitor and assess the issues after the response.

Recover

Also, the cybercrime breach can be executed by proper execution and business-continuity planning which will help the organization to recover quickly. This is achieved through frequent internal communication that is accomplished through the governance auditing as well as quick and safe restoration of the business operations (Getie 2007, pp.450).

Re-evaluation

Finally, after the restoration of operations and their security, it I necessary to improve the crisis response, determine the need for training, review the security privacy and data policies, and finally is considering the third-party role in the breach.

Governments

The auditors in the organization usually identify things that are going wrong and add value to be through the identification of the issues which need improvement. The primary consideration of the accuracy is the presentation of the financial accuracy. The governance audit helps in the development of the internal control systems, independent, meaningful and regular reporting of governance.

The internal auditors trained to use the modern techniques for implementing business operations, streamlining processes and systems, as well as ensuring the compliance with all the state, local agencies, and federal agencies. The internal auditors who conduct the governance audit usually do continuous testing which yields quick corrections and solutions.

In the government, the governance audit can identify any possible audit. In 2014, the association of verified fraud examiners identified fraud detection. The organization has a misconception that they don’t need an internal auditor. According to the ACFE observation, the government sector is the second institution to experience fraud behind the financial or the banking industry. Through these measures, governance audit is essential in the public sector. There is a misconception that catching the fraud is through the external auditor. The governance audit is done severally, hence, critical in detecting errors that cannot be done in the annual audit. To GFOA, the government should have a degree of the internal audit. The government plays an essential role in helping in the maintenance of the comprehensive framework. The government is recommended to encourage the obtaining of the accounting firm or assign the responsibility to the employees to co duct the activity (Carcello 2011, pp.32).

The following are the recommended body for conducting the government audit in the government organization

The internal audit department who work full time-It is wise for an organization to hire an internal auditor who directly reports to the governing body to ensure their independence is maintained. The importance of using them is the ability to assess as well as to mitigate the risks full-time. Also, through optimizing processes, systems, and efficiencies, the value added auditing is enabled. The cons to the individuals are associated with the full-time salaries, benefits as well as the diminishing value of the governing body.

Outsourced internal audit (part time)- they engage in the internal auditing who serve through a mutually agreed contract. The key pros are inclusive of the limited costs, and talented professional who can practice in the industry as well as in in other firms. The disadvantages are inclusive of the smaller projects which are outside the agreed services (Cohen 2004, pg. 67).

Assigning the audit responsibilities to the regular employees- as part of the normal responsibility, one can assign the role of auditing to the employees. The fundamental importance of the method is the ability to identify the opportunities and errors for the improvement. The cons are inclusive of hurting normal relationship in the small sectors in the organization.

The combination- in some organization, combining various elements is a feasible solution to use regular employees in performing the internal auditing tasks under the supervision, independence as well as the direction of the outsourced firm (Dewing 2004, pg. 45).

The governance auditing is further highlighted by the level of mitigating effect in the cases of fraud. The governance auditing cannot eliminate scams, but they can reduce their impact on the organization’s profits and expenses.

Every team should evaluate the need of having an internal auditor as well as the cost of recruiting one. They can be obtained at a particular cost, and they can provide plenty of benefits in the organization rather than just looking for what is wrong. Hence, every organization should seek to identify the best way to do their governance auditing which is affordable as well as beneficial to the team (Prawitt 2009, pp. 1256).

Commercial and industrial real estate

The governance audit of energy firms is the inspection, analysis, and survey of the energy flow to ensure its conservation in the in the system, process as well as in the building which reduces the amount of input in the system without affecting the output of the process negatively. The energy audit is focused on the reduction of the use of the energy while ensuring safety, comfort, and health. It is done concerning the effective priorities to save the energy use. The energy audit is done in both organizations, home as well as in nations (Quick 2007, pg.567).

Home energy governance audit

It is the process of evaluating which rating the efficient use of energy by the utilization of the professional equipment which suggests the best way for the improvement of its use. The auditing at the home level may entail recording of the building envelope characteristics such as the doors, skylights, ceilings, walls, windows as well as the floors (Law 2011, pp.565). The report of the energy audit may include the estimation of the energy use given thermostat settings, roof overhang, solar orientation, and the climate criteria. The homeowner’s bill history is the most essential in estimating the energy consumption, for example, the electricity, fuel oil, energy sources, natural gases and others. The principal effect of the energy use is the climate, home age, and the user behavior. The audit entails the home owner’s interview seeking to understand the pattern of the energy consumption over a specific period. The home energy governance audit is meant for looking for the cost effective ways for the improvement of the efficiency and comfort of a building. With the governance audit, the homes can qualify for grants from the central governments due to their compliance to the same.

In the United States

The kind of service is facilitated by;

• The state energy office

• The energy conservation department such as public utility companies

• The private-sector companies who are independent such as the insulation contractor

The company provides several services which include loans and incentives which facilitate insulation and provide incentives to switch. There are several recommendations for insulation which should be looked in the following organizations: the local builder’s organization, the US department of energy, the local building codes and finally the inspector’s office in the local construction.

There are essential tools which can be used by a homeowner in the assessment of the home energy potential that is highly likely to be provided by the state agencies. A simple do-it home governance audit must not need any specialized tool. One can spot a problem on the energy loss and decide to improve its efficiency (Bhasin 2015, pg. 234).

Hence the government audit is at times essential in homes to check the energy use, hence significant (Bernstein 2011, pp.293).

In other companies

All organizations need to comply with a certain specific standard for the systematic examination of the quality systems which is carried out a particular team of internal auditors. The audit is an essential part of the quality management system and a key ISO quality system standard element. The governance audit for checking the compliance with a particular standard is performed at a given predefined time to give room for the institution to define the monitoring procedure which is liked to an action which is effective (Felix 2001, pp. 515). The process may involve the results-based assessment criteria. From the upgrade of the ISO900 standards, the focus has been shifted to the effectiveness of quality management system, and the results have been achieved through its implementation. The governance audit is the best tool for the verification of the scientific achievement and judging the effectiveness of particular target levels. Also, the governance audit usually provides evidence of a specific elimination and reduction of some problem areas. The governance audit should report corrective action, non-conformance and the area of practice highlight. As a result, the departments can share information, contribute to the working practices as well as highlight the right practice areas (Felix 2001, pp. 30). The governance audit which checks quality is an integral part of the regulatory requirements and compliance. The governance audit has been adopted in the education systems in monitoring quality in nations such as Norway, USA, Finland, Australia, Sweden, and New Zealand. The initiation of the audit in the UK in the education system was focused on the procedural issues rather than the quality system implementation efficiency. The governance audit can as well be used for the safety systems or monitoring technique. It focuses on the complacency rather than the effectiveness of a particular implemented system. The governance audit in checking quality can be managed by the use of self-assessment tools or software. The tools are achieved by conformance to standards, fitness for purpose, quality cost, and finally accuracy to the cost of poor quality (Baker 200, pp. 785).

Hence, companies must ensure that their organization is operating with the maximum efficiency. Operations which are ineffective add to the overhead and reduce the gained profits. The governance audit can point at unnecessary paperwork, and failure of the company to comply with a particular paperwork. It is also helpful to an organization in helping the team avoid fines or any legal action due to non-compliance. The team must ensure that they comply with the human resource law for any employee who seeks to join the company (Adams 2014, pp.10).

The governance audit may seem to be expensive and the small businesses may shy away from it, but there are more affordable ones (Alzoubi 2012, pp. 19). The audit is beneficial in reducing the probable fines, increasing the efficiency of some systems and identifying the problem immediately they arise. It helps in avoiding conflicts; improve the financial and the operating controls. The audit provided a room for the team members to discuss the results and preparing the ownership objective. The governance audit helps the company to thrive as well as to grow. Hence, all organization should seek for the best team within the organization to conduct the governance audit. It is beneficial, productive and drives to growth.

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