Audit observations

  • Release version: Washingtondc
  • Updated February 1, 2024
  • 2 minutes to read
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    Summary of Audit Observations

    Audit observations are crucial findings resulting from an audit process, which includes reviews, analysis, and discussions. They highlight significant issues for audit managers and are logged in the system to track performance against audit criteria. Observations can be created from audit engagements that are not in Follow Up or Closed states, including various audit tasks.

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    Key Features

    • Creation of observations by users with the role snaudit.user.
    • Assignment of respondents (entity and control owners) and peer reviewers (auditors and audit leads).
    • Workflow includes states: Draft, Review, Respond, Finalize, and Closed.
    • Options for peer reviews and responses from respondents, with notifications to involved parties.
    • Ability for reviewers to request revisions or provide feedback through the Results section.

    Key Outcomes

    After the audit, observations can be summarized to present problems, discoveries, and recommendations. The audit team assesses whether an observation is reportable or can be classified as a recommendation, observation, or best practice. Ultimately, the workflow ensures that observations progress through necessary reviews to reach a closure, resulting in actionable insights for improving audit processes.

    Audit observations are the results of an audit. As an important part of the audit report, audit observations represent the results of reviews, analysis, interviews, and discussions.

    Audit observations are used to bring significant issues to the attention of audit managers. Observations are logged in the system. For example, if a bank's operations are being audited, then the audit observations are based on evidence about how the bank's operations perform against the audit criteria. During control testing, interviews, and walkthroughs, audit observations are recorded. An audit user can create an observation from an engagement if the engagement is not in the Follow Up or Closed states. An observation can also be created from all types of audit tasks.

    After the auditor completes the audit, the auditor then presents the audit observations to the audit managers. By using the audit observations, the auditor can present a summary of problems, discoveries, and recommendations. The audit team reviews the observations to determine if the observation is a reportable issue. The audit team can also determine if the observation can be tracked as a recommendation, an observation, or a best practice.

    In its life cycle, an audit observation moves through the following states:
    1. Draft
    2. Review
    3. Respond
    4. Finalize
    5. Closed
    The workflow of an observation is as follows:
    1. An audit user with the role sn_audit.user creates an observation.
    2. The observation creator assigns respondents and peer reviewers to the observation. The respondents are the entity owners and control owners. The peer reviewers are the auditors and audit leads of the engagement.
    3. The observation creator can request a peer review of the observation. In that case, the following then happens.
      1. The peer reviewer gets a notification to perform the peer review. The peer reviewer can view the task under Audit > Observations > My Pending Peer Reviews.
      2. The peer reviewer completes the review.
      Note:
      When a peer review is requested, the state remains as Draft but the substate changes to the Peer review requested substate.
    4. The observation creator can also request a review. The reviewer can be an audit manager or the audit lead.
      1. The reviewer gets a notification to perform the review. The reviewer can view the task under Audit > Observations > My Pending Reviews.
      2. The reviewer can either request a revision of the observation or request a response from the respondent. The reviewer can also provide feedback in the Results section by selecting the appropriate option.
    5. If the reviewer requested a response from the respondent, then the respondent responds to the observation by navigating to Audit > Observations > My Pending Response.
    6. The observation moves to the Finalize state.
    7. The observation is closed and an issue is created.
    Figure 1. Audit observations workflow
    The lifecycle of audit observation