Audit and Assurance

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Should We Continue Audit Something that is Closing Down?

  • 1.  Should We Continue Audit Something that is Closing Down?

    Posted 28 Aug, 2019 21:24
    Hi there,
    Okay, we were suppose to audit on a subsidiary this year and that was part of the audit planned that was approved by the Board Audit Committee.
    And now the subsidiary was instructed to close down the business. The senior management wants this audit not to be conducted as they think it is not necessary for it to be audit any longer and also would save them cost as the subsidiary is located overseas.

    I wonder if based on other organisations, when a subsidiary is closing down, must we stop auditing them or should we proceed?

    (a) Our subsidiary has not been audited for more than 4 years so I still think it should be audited;
    (b) There is no confirmed date as to when the subsidiary is going to shut down so they could still reverse that decision;

    Any advice in here? or anyone has experienced this before?

    Rgds,


  • 2.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 29 Aug, 2019 08:40
    Hello,

    Could you please specify what type of audit??  External audit / attestation / internal audit ?
    Is it IT audit, because if that the case it depends on the financial audit team.

    You need to ask (maybe its a silly question): why does the client needs to be audited / who are the stakeholders.
    I believe the answer is more with the client if you are talking about external audit.

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    Marat Kaisseov
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  • 3.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 29 Aug, 2019 19:02
    hi marat.
    this is an internal audit that was suppose to audit our own companys subsidiary located overseas. Its not an IT audit. Its an investment audit..


  • 4.  RE: Should We Continue Audit Something that is Closing Down?

    Online Forum Topic Leader
    Posted 29 Aug, 2019 15:12
    This really depends on the risk e.g.
    • Will there be a reputational risk if something arises after its shut down?
    • ​​What will happen to the assets / how will they be disposed of?
    • What happens to the data?
    • What is the objective of the (normal) on going audit?  What assurance does it provide?  Would these be an ongoing risk after the entity closes?


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    Ian Cooke
    Audit & Assurance Topic Leader
    ISACA Journal Columnist
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  • 5.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 03 Sep, 2019 04:00
    Need to look into this issue seriously.
    Two things prompting: Last 4 years no audit; sudden decision to drop the audit.
    If still feel that no audit required, it is suggested to get board approval for the same.
    Seems something fishy.

    Regards,

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    Srinivasa Thaduri
    Sr Mgr
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  • 6.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 03 Sep, 2019 06:31
    The CIA will be talking to the Board tomorrow so we shall see but I would be shock if the Board too thinks audit should not go in. The Board of Audit Commitee should be equipped with the best standards / practices / knowledge about audit. They should be thinking from all risk angle and make that decision. This is a no-brainer that an audit needs to be done because as you said, it's already a red flag when the subsidiary is closing down and then suddenly audit does not need to go in.


  • 7.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 30 Aug, 2019 11:54
    ​Based on this, you need to understand the risks and scope in / our your audit accordingly.
    Please update us with the outcomes.

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    Marat Kaisseov
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  • 8.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 30 Aug, 2019 20:59
    Hi Mohd,

    This is a dilemma often faced by the management and stakeholders who are not well versed with security or who have this attitude "there are other pressing matters than security". Often the functional units which are going or dying are seen as an opportunity to save cost and so the security of it is also affected by the same thinking. The fact is as long as the subsidiary or the functional unit is still functional as a part of your business ecosystem, accessing or affecting the data which you would not otherwise put on facebook, it is to be treated just like any other unit. Which means the security and audit of it need to be a living part of the information security program till the day it goes out of business.

    I hope it helps.

    Regards
    Asheesh

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    Asheesh Gupta
    Cyber Lead
    CISM/CISSP/CCSA/CCSE/CCNA/JNCIA/NSA
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  • 9.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 31 Aug, 2019 07:01
    I think it should be audited

    Here is why;
    1. It will provide insight to management on what went wrong, resulted to closing down
    2. This insight can be used for other investment decision
    3. Audit will involve review of steps taken to close the investment, including disposal of data and assets
    4. Management needs independent assurance on all transactions performed up to closure of the investment


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    Modest Kissima
    Manager, Internal Audit
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  • 10.  RE: Should We Continue Audit Something that is Closing Down?

    Online Forum Topic Leader
    Posted 01 Sep, 2019 04:42
    Edited by Yolanda Theophilus 01 Sep, 2019 05:00
    Hi Mohd,

    I believe that as it was in the plans and approved by the Board of Audit Committee to be audited, there must have been reasons based on risks why it needs to be audited and if time and resources allow. In addition to being audited, the company should involve the expertise of a liquidator since the company is closing down.

    If the subsidy is located overseas and is highly in need of an audit, internal audit Senior management can consider outsourcing the audit and provide the objectives of the audit to an local audit firm and rely on their report, co-source with local firm and perform some procedures remotely or find in the budget to send staff to perform audit.

    Ultimately, if the company is closing it seems that the value of the business has been reduced, and other insight from other department involvement, such as the strategy team may be added value.

    Regards,
    Yolanda

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    Yolanda Theophilus
    2019 Online Forum Topic Leader
    Risk and Audit Consultant, CPA, MBA, CISA
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  • 11.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 04 Sep, 2019 06:21
    I've seen this many times. There is only 1 status that matters -deployment status.

    Production, active = audit

    the only potential variable out there is Inherent Risk. In the very least you can do a control self assessment.

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    James Arnold
    EIS Third-Party Cyber Risk Manager
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  • 12.  RE: Should We Continue Audit Something that is Closing Down?

    Posted 04 Sep, 2019 16:47
    Discuss with senior stakeholders as they have clearer visibility on the future of that subsidiary, and what concerns them;  you may have to change your scope.

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    Marino Mata
    Auditor
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