Internal Audit Preparation

Internal Audit Preparation Checklist for the Finance Department at SAP

Required Documentation

1. Financial Statements

   • Balance Sheets
   • Income Statements
   • Cash Flow Statements
   • Statement of Changes in Equity

2. General Ledger

   • Detailed transaction records
   • Journal entries

3. Accounts Receivable and Payable

   • Aging reports
   • Reconciliation statements
   • Customer and vendor contracts

4. Bank Statements

   • Reconciled bank statements for the audit period
   • Bank reconciliation documentation

5. Budgets and Forecasts

   • Current and prior year budgets
   • Variance analysis reports

6. Internal Controls Documentation

   • Policies and procedures manuals
   • Risk assessment documentation
   • Control activity documentation

7. Tax Documentation

   • Tax returns for the audit period
   • Supporting documentation for tax deductions and credits

8. Compliance Documentation

   • Regulatory filings
   • Compliance checklists
   • Correspondence with regulatory bodies

9. Contracts and Agreements

   • Lease agreements
   • Loan agreements
   • Service contracts

10. Audit Trail Documentation

    • Access logs for financial systems
    • Change logs for financial data

Key Areas of Focus

1. Revenue Recognition

   • Ensure compliance with IFRS 15 or ASC 606
   • Review contracts for proper revenue recognition

2. Expense Management

   • Verify expense approvals and documentation
   • Review expense allocation methods

3. Asset Management

   • Inventory valuation and management
   • Fixed asset register and depreciation schedules

4. Liabilities and Provisions

   • Review of contingent liabilities
   • Adequacy of provisions for bad debts

5. Cash Management

   • Review cash handling procedures
   • Assess cash flow forecasting accuracy

6. Internal Controls

   • Evaluate the effectiveness of internal controls
   • Identify any control weaknesses or gaps

7. Compliance with Policies

   • Adherence to company policies and procedures
   • Compliance with local and international regulations

8. IT Controls

   • Review access controls for financial systems
   • Assess data integrity and security measures

Compliance Checks

1. Regulatory Compliance

   • Ensure adherence to local and international financial regulations
   • Verify compliance with tax laws and reporting requirements

2. Internal Policy Compliance

   • Confirm that all financial transactions comply with internal policies
   • Review adherence to the company’s code of conduct

3. Audit Trail Verification

   • Ensure all financial transactions have a clear audit trail
   • Verify that all changes to financial data are documented and justified

4. Segregation of Duties

   • Review roles and responsibilities to ensure proper segregation of duties
   • Identify any potential conflicts of interest

5. Training and Awareness

   • Confirm that finance staff are trained on compliance and internal controls
   • Ensure awareness of the importance of ethical financial practices

Final Steps

• Schedule Pre-Audit Meetings

  • Organize meetings with key stakeholders to discuss the audit process and expectations.

• Conduct a Self-Assessment

  • Perform a preliminary review of all documentation and processes to identify any potential issues before the audit.

• Prepare for Auditor Queries

  • Anticipate questions from auditors and prepare responses and supporting documentation.

• Establish a Communication Plan

  • Designate a point of contact for the auditors and establish a communication protocol for the audit period.

By following this checklist, the finance department at SAP can ensure a thorough and organized preparation for the upcoming internal audit, minimizing potential issues and enhancing compliance.