Explain the following principles and concepts of auditing?

Question

a) Random Sampling Selection Method
b) Walk Through Test
c) Materiality
d) Audit risk

Answer 1

INTRODUCTION TO EMS AUDITING CONCEPTS AND ISO 14000

Edwin Pinero

Office of the Federal Environmental Executive



Overview

The Environmental Management System (EMS) audit is based on the generic concept of auditing. Simply put, an audit, any audit, is the comparison of actual conditions to expected conditions, and a determination as to whether one is in conformance or not in conformance. This is the same philosophy used to perform financial, quality, regulatory compliance, and systems audits. It is prudent to first review what the common elements are in order to better understand why audits are different.



There are several definitions of audit components that are common to any type of audit. ISO 14010 defines these terms for EMS audits, but they apply in other cases also. As a matter of fact, the ISO committee decided not to create auditing standards for other types of audits, such as compliance audits, although it was originally considered. The main reason for deleting the work items was because the concepts and processes defined in 14011, originally intended for EMS audits, were generic enough to be applied “as is” to other types of audits.



An audit is fundamentally a comparison of audit evidence to audit criteria to determine findings. The evidence is the objective information collected through interviews, visual reconnaissance, and documentation review. The audit criteria are the expectations or “rules” of how conditions should be. It is the criteria that distinguish one audit from the next. For example, in compliance auditing, the criteria are the regulations. With an EMS audit, the criteria would be the description of the expected system elements. In this case, the EMS criteria would be that described in ISO 14001, the specification standard.



When evidence is compared to criteria, one can determine whether the audited entity does or does not conform. This determination is a finding, and a finding can either be one of conformance, or non-conformance. Therefore, an audit will always produce findings, even if what is being audited is in full conformance with criteria.



Other key definitions to be aware of with auditing are: objectives, scope, auditee, client, and auditor. The audit objective(s) is simply why you are conducting an audit; usually the reason is to demonstrate conformance to stated criteria. The audit scope is what entity is being audited, and can be a company, a site, or unit within a site or company.



In the ISO 14000 realm, there is a clear distinction between the auditee and client. The auditee is the entity being audited. The client is the party commissioning the audit. For example, a client can be the customer, and the auditee a supplier to that customer. In ISO 14000, this distinction is important because the client sets the scope, objectives, and plan for an audit, not the auditee, although it is expected the auditee will be involved and cooperate.



The auditor is the one actually collecting evidence and determining findings. The auditor can be comprised of several individuals on a team. There are requirements in ISO 14001 that state that those performing functions within the EMS, such as the auditors, be qualified in their tasks. This means the auditors must have received training in EMS auditing. However, there may be audit team members who do not have the training, but are on the team because of some unique expertise, such as process, language, or regulatory knowledge.



The ISO 14000 Auditing Standards

The only standard in the ISO 14000 series that must be followed for third party verification (i.e. “getting certified”) is 14001. In that document, there is a requirement that the management system be periodically audited. Section 4.5.4 of ISO 14001 states that “the organization shall establish and maintain program(s) and procedures for periodic EMS audits to be carried out in order to:



(a) determine whether or not the EMS:



• Conforms to planned arrangements for environmental management including the requirements of this international standard; and



• has been properly implemented and maintained; and



(b) Provide information on the results of the audits to management.”



This requirement means that the organization shall:



- Have procedures governing audits and follow-up actions

- Operate a comprehensive system of audits

- Plan its audits

- Document its audits

- Demonstrate that EMS activities comply with planned arrangements

- Determine that the EMS has been properly implemented and maintained

- Schedule audits on the basis of the status and importance of the activity

- Record results



This however does not convey the full requirements of ISO 14001, as many other clauses of the standard also have an impact upon the EMS.



The ISO 14000 committee decided to prepare guidance standards for users describing techniques to help meet the audit requirement of ISO 14001. The resulting auditing standards

Answer 2

Auditing Concepts

Answer 3

a). A sample is a subject chosen from a population for investigation. A random sample is one chosen by a method involving an unpredictable component. Random sampling can also refer to taking a number of independent observations from the same probability distribution, without involving any real population. A probability sample is one in which each item has a known probability of being in the sample.



b). A walk-through test is a procedure under financial audit performed by auditors.



The purpose of walk-through tests is for the auditors to establish the reliability of a client's accounting and internal control procedures, It is common for walk-through tests to be performed as tests of controls.



Auditors trace a number of transactions through the financial system from source to ultimate disposition.

A walk-through test is a procedure under financial audit performed by auditors.



The purpose of walk-through tests is for the auditors to establish the reliability of a client's accounting and internal control procedures, It is common for walk-through tests to be performed as tests of controls.



Auditors trace a number of transactions through the financial system from source to ultimate disposition.



c). Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework such as Generally Accepted Accounting Principles (GAAP). The assessment of what is material is a matter of professional judgment.



d). Possibility that the auditor will not uncover irregularities in the financial records resulting from fraud, negligence, or other reasons. For example, the auditor's sampling techniques will not always uncover an improper item such as an overstated expense

Answer 4

Here is the exact definition from the Glossary of Words, Terms and Phrases in the book "Dianetics the Modern Science of Mental Health" by L. Ron Hubbard The word or term Dianetics: Greek DIA, through and NOUS, Mind or Soul. What the MIND or Soul is doing to the BODY. CLEAR; THE OPTIMUM INDIVIDUAL; NO LONGER POSSESSED OF ANY ENGRAMS. ENGRAM: ANY MOMENT OF GREATER OR LESSER "UNCONSCIOUSNESS" ON THE PART OF THE ANALYTICAL MIND WHICH PERMITS THE REACTIVE MIND TO RECORD; THE TOTAL CONTENT OF THAT MOMENT WITH ALL PERCEPTICS. REACTIVE MIND : THE CELLULAR-LEVEL MIND WHICH IS NOT "UNCONSCIOUS BUT IS ALWAYS CONSCIOUS - THE HIDDEN MIND, HITHERTO UNKNOWN. CLEAR : DICTIONARY DEFINITION: UNCLOUDED, HENCE SERENE; CLEAN; AUDIBLE; DISCRIMINATING; UNDERSTANDING; FREE FROM DOUBT; SURE; FREE FROM ANY ENTANGLEMENT. Dianetic therapy has been practiced and in use since the publication of the book "Dianetics the Modern Science of Mental Health " May 9th 1950. Also from the same Glossary this might help explain "rundown". running down : to search out and locate the negative influence of something; erasing . Explained on page 444 of the book "Dianetics the Modern Science of Mental Health," running out: exhausting the negative influence of something; erasing. Also explained on page 444 of the same book. In Scientology: ( from Dianetics and Scientology Technical Dictionary) Rundown (noun) , a series of steps which are auditing actions and processes (spiritual counseling ), designed to handle a specific aspect of a case and which have a known end phenomena (result). All your other many questions would be answered by reading the comprehensive text, "Dianetics the Modern Science of Mental Health" which was written to fully explain and answer all questions about the theory behind and correct application of this technique. Your local library has a copy in the Self Help section. Hope this helps.

Answer 5

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i had taken some courses under some chinese fengshui masters. and i can tell you that there no such thing as a general guideline to follow, because there are too many fengshui concepts, and each one of them is complicated to explain here. and when someone makes an audit to a house, he/ she must visit the house personally to get precise measurements. thus if you are interested to learn fengshui, get the book: A Master Course in Feng-shui by Eva Wong ISBN: 1-57062-584-0. Ms. eva wong is considered to be a very good fengshui master, but she does not offer courses. she is even better than ms. lillian too. ms. lillian is a writer and not a fengshui master. ms. lillian wrote many books about 8 mansions, but she did not include the secret of attracting wealth using this concept in any of her books. in that book, ms. eva wong writes about flying stars concept. you need to understand that the book is good, but most fengshui writers just do not write about some alternative ways on the application of the concept. thus, it is still better to take some courses under a master. i know that you want an easy answer. but the truth is when a fengshui does an audit. he/ she must first look at the location of the house in relation to water/ road/ river/ bridges and mountain/ building/ structures, around the house. or where is your house located in the subdivision. then we also take the direction of the source of yang energy, usually the main front door - this must be a precise degree measurement using a compass. then you can use flying stars to calculate for the good locations and bad locations in your house. the good and bad locations pertain to the energy distribution based on the calculation or "flying of the stars". the energy is not what you think it is. it is chi. it cannot be felt nor sensed. it just can be calculated using this concept. because a direction like east (45degrees) is subdivided into 3 parts (15degrees each), a tiny deviation can make a big difference. thus, it is difficult to summarize everything here. without the concepts, most of the fengshui that you will do are not that powerful to bring in wealth or health to change your life significantly. even with placing aquariums or deciding where your kitchen must go depends on using these concepts. i think what most fengshui book writes about are things that are common sense to most fengshui practitioners or to most chinese. and these things won't change your life. for me, it is just a waste of time to even bother with these without the concepts. if you know the concepts, you will not even bother to use mirrors or baguas or putting statues around the house. because you know more powerful ways to achieve what you like. and in fengshui, you need to have a goal to apply a concept. for example, you need to attract wealth, then you need to activate the current water star. to do this, you need to put an aquarium with an aerator (the number or color of the fish do not matter at all, like what most books tell you - this is putting you off, so that you will not know the secret of this, which is that you need a moving water > which is an aquarium with an aerator or a flowing water) at the current water star - this is where the concept comes in. if you do the calculation, it will locate the current water star in your house. in fengshui, you can only attract either health or wealth - 1 application for 1 goal. there is no such thing as harmonizing the elements to make your place in harmony - this is another misconception that writers and fengshui people use for you not to get their trade secret. and people actually believe them! =) i know that this is not an answer to your question, but i hope that you get the book. it will explain to you a lot of things. and with it, you can diy your house and other houses. if you do buy the book, also get a compass - it is better to get a chinese compass or the luo pan, because each circle represent something in the fengshui concepts. but you can replace it with a compass with a rotating compass at the middle. ps - for me, it is better for a fengshui application to be supported by at least 2 fengshui concepts. you need to use the fengshui concepts together to cross reference them. the more concept you use in an area, the more powerful it becomes. - colors do not affect fengshui, it is more that it affects our minds. and fengshui deals more with the environment/ house- not mind. you need to understand that fengshui is not a belief, it works even if you do not believe in it. meaning, if you use the concepts properly, after application, you need to forget about it and go on with life. and after 1-3 months, life should be easier, like everything is falling into place, like suddenly you just got more clients, that is if you are attracting more wealth. - in my case, if i want more clients in my business, whenever i do a fengshui in my house, i usually get a result just after a couple of weeks. - if you combine the flying stars and the elements, then your fengshui will be a lot more powerful than mere painting your room green! - and you need to understand that nobody has done a 100% fully fengshuid house. if you achieve a 67% or 2/3 done right, then it is already good.