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AGENCIES 2-1-2007
EXTERNAL AUDIT
PROCESS
OVERVIEW The audit process is designed to ensure that:
DEFINITION OF AN
EXTERNAL AUDIT/
REVIEW An audit or review is a group of activities performed by an external
organization for the purpose of evaluating DHS’ performance and/or
compliance with program or financial rules and regulations. An audit or
review generally results in the issuance of a report. The report may
require DHS to perform corrective action.
The general process for audits and audit follow-up is described below.
This process may not be followed precisely by all external auditors/
reviewers. Some steps in the process are unique to a particular external
organization. The Office of Internal Audit (OIA) coordinates the depart-
ment-wide external audit process. DHS utilizes an audit committee for-
mat to facilitate the external audit process. The chief deputy director
identifies organizational units that must have an audit committee repre-
sentative. The director of the organizational unit appoints audit commit-
tee representative(s) to the audit committee.
RESPONSIBILITY
OF AN AUDIT
COMMITTEE
REPRESENTATIVE The responsibility of an audit committee representative is to coordinate
audit activities within their organizational unit and with the Office of
Internal Audit. Other functions include acting as a liaison between their
organizational unit and OIA for preparing and submitting responses,
processing requests, and advising their managers of audit/review
issues.
REQUEST TO
PERFORM AN
AUDIT/REVIEW BY
AN EXTERNAL
ORGANIZATION The audit process begins when an external audit agency notifies OIA of
an upcoming audit/review. When such requests are made elsewhere in
DHS, the requestor should be directed to OIA. In responding to audit
requests, the Office of Internal Audit will encourage the requestor to
minimize duplication of effort by reviewing the audits of DHS performed
by the Office of the Auditor General (OAG), OIA, and Federal auditors.
AUDIT/REVIEW
ACTIVITY
Conferences Audit fieldwork begins and ends with a formal meeting (conference).
OIA schedules these as well as any interim meetings. OIA contacts the
affected organizational unit audit committee representative to arrange a
mutually agreeable time and place for the conference. OIA distributes
audit information concerning scope and needed resources to the audit
committee members prior to the entrance conference. OIA informs the
auditor/reviewer of the time and place for the conference.
Entrance The Office of Internal Audit notifies DHS personnel of planned audits. It
Conference also provides the external audit agency with the names of the key indi-
viduals responsible for the program and/or related fiscal area scheduled
for audit. At the entrance conference, the auditors provide an overview
of the audit, discuss the general scope of the audit, obtain information
from audit committee representative(s) that may impact the scope of
the audit/review, and establish contacts within the DHS. Logistical
arrangements also may be discussed.
On-Site Audit Work The auditor/reviewer performs on-site audit work. Audits/reviews may
be performed solely at central office locations or they may involve site
visits to field locations.
• Coordinate activities for issues that impact more than one DHS
organizational unit.
Status Updates The external auditors/reviewers may meet with DHS staff at the com-
pletion of major audit segments. They may issue written findings as
they are identified. The auditors/reviewers are instructed to direct all
audit findings that require a formal response to OIA. OIA directs audit
memorandums (which identify findings) to the impacted DHS organiza-
tional unit, coordinates responses when an audit/review issue impacts
more than one organizational unit, reviews DHS responses, and pro-
vides the auditors/reviewers with an official DHS response.
Audit Finding External auditors/reviewers may issue audit finding memorandums dur-
Memorandums ing the on-site fieldwork. Audit finding memorandums provide the
audited organizational unit with an advance notice of possible audit
findings. The responsible deputy director submits a response to the
Office of Internal Audit for forwarding to the external auditors/reviewers.
On-Site Exit The on-site exit conference is held at the conclusion of the audit/review
Conference fieldwork and prior to the issuance of the draft report. At this meeting
the auditors/reviewers informally notify the auditees of their findings.
Top level management is invited and encouraged to attend this meet-
ing. Items of potential disagreement or factual misunderstandings are
discussed at this conference. The auditors may also present other
observations that will not appear in the written report. This is an oppor-
REPORTS
Draft Reports Following the exit conference, the external audit agency may submit a
draft report of the audit findings to the DHS director and OIA, requesting
a written response to the report within a specified period of time. OIA
distributes copies to the organizational units affected by the audit/
review.
Response to the The responsible deputy director submits an official DHS response to the
Draft Report Office of Internal Audit for forwarding to the external auditors.
The draft responses are sent to OIA. For audits performed by agencies
other than the OAG, a final exit conference is not usually held. A deputy
director desiring such a conference should request it when submitting
the response.
Final Exit The final exit conference is DHS’ last opportunity to request clarification
Conference or changes in the text of an audit report. The focus of the conference is
disputed findings. Efforts are made to reach agreement on the audit
recommendations and DHS’ response. The participants in the confer-
ence may include the director, deputy directors, audit committee repre-
sentatives, OIA, and other designated DHS employees.
Final Report After obtaining the department’s responses to the draft report, and/or
having the final exit conference, the external auditor issues a final
report to the DHS director. OIA distributes copies of the final report to
the impacted organizational units, or notifies them that the report has
been issued and is available on-line.
Corrective Action A Corrective Action Plan (CAP) is required for all audits/reviews that
Plan contain findings and recommendations. The deputy director who over-
sees the area that is the subject of the audit reports is responsible for
development and implementation of the CAP. See Administrative Hand-
book, Audits (ACH) 1012-7 for the corrective action process.