Income audit is an audit exercise that focuses on recovery of lost income due to improper processing of financial transactions by users or defects in the business application.
Improper processing of financial transactions can result from either deliberate attempt by users to avoid collecting charges on certain transaction or genuine error on the part of users. Experience has shown that in most cases, non-collection of charges on processed financial transactions is as a result of genuine error/knowledge gab on the part of the users.
On the other hand, income leakages as a result of defects in the Business Application usually occur when income parameter files of a business application are wrongly set up or when the system malfunctions resulting into COT, interest and commissions not being charged on some accounts as at when due. These omissions might not be noticed immediately and can go on undetected. Many organizations are losing hundreds of millions of Naira annually as a result of these irregularities.
It requires the skills of experienced auditors with IT and financial audit background to carry out effective income audit in an organization. IT audit skill will be used to develop scripts/programs that are required to audit the business application while the financial audit skill will be used to analyze information obtained and make reasonable deductions.
BENEFITS OF INCOME AUDIT
The major benefits of income audit are:
- It adds value to audit exercise and contributes to the bottom line/profitability of an organization. Income recovered is credited to the Profit & Loss Account to boost the organization profit.
- Appropriate measures are put in place to block the sources of the income leakages. Thereby ensuring that all income are appropriately and accurately earned.
MAJOR HIGHLIGHTS OF THE INCOME AUDIT
- The proposal is for a specialized audit of the organizations focusing on recovery of lost income and use of Audit Tool/Software to identify major financial irregularities that may have passed through the system undetected.
- The audit will cover all areas that generate income/fees for the organizations such as; Branch Operations, Foreign Operations, Domestic Operations, Treasury Operations, Clearing Units, Credit/Risk Management Division and other Head Office Divisions.
- Charges that will be recovered include: COT, commissions, interest on loans/overdraft/investment/savings and other miscellaneous income of the organizations.
- Income audit of the organizations’ top 100 customers may be undertaken depending on whether or not the organizations wants this area to be covered.
- General review of income parameter files of the business application will be carried out to ensure that charges are applied and collected as at when due and that there are no income leakages as a result of system malfunction or wrong parameter set up. Appropriate audit software will be used to benchmark and audit the business application.
- To be able to carry out the audit and track major errors/irregularities/fraudulent events, appropriate scripts/programs would be developed and deployed during the audit exercise. Most of the scripts would focus on financial transactions where fraud/financial irregularities are likely to occur.
- Critical issues uncovered during the audit exercise would be investigated exhaustively.