Abu Dhabi Distribution Company: Auditing Processes

Introduction

Abu Dhabi Distribution Company (ADDC) was established in 1998 and its primary business is to facilitate the distribution of electricity and water services to its clients that are mainly drawn from the emirate of Abu Dhabi. Its specific task is to design, plan and construct all electricity and water networks of Abu Dhabi. The joint stock company currently boasts of more than 412540 customers across the region and hence stands out to be one of the largest players in the sector. The company is highly regulated and its operations are subject to scrutiny by the regulation and supervision bureau which ensures that all services are provided in the best interest of the customers. The regulatory body therefore monitors the performance of the company alongside other sector players and ensures that they offer quality services to the customers at low costs. It particularly controls the revenues that the company can achieve through price controls.ADDC was established on a strong mission and vision of providing quality services to the customers by becoming the leading supplier of water and electricity services that meets international standards. The company has also crafted key values that will continue to guide its operations. They include: commitment to the customers, operate with high standards of ethical behavior and uphold integrity, work together as a team, promote excellence in its operations and high level of commitment to its workforce. The company has a lot of stakeholders with interest in its business. They include: Transco, Abu Dhabi executive council, Abu Dhabi water and electricity authority and the executive council among others. With such a huge presence of stakeholders and clear business goals anchored in its vision, mission and values, the company’s operations are conducted in a transparent manner and hence the concept of auditing comes to play. Auditing has become a very comprehensive undertaking that ensures that organizations are able to meet their objectives through proper utilization of the resources available. In this paper we shall discuss the concept of pre-assessment audit which normally gives way for the formal auditing process. We shall also evaluate the procedures that the company could use in conducting the internal audit which is also a key component of company auditing.

Pre-assessment audit

Pre-assessment audit is a very important process in auditing a company. It basically comprises the audit of the quality systems within the organization that allows the third party or external auditors to conduct the main auditing process. This process therefore prepares the ground for the full scale auditing and hence will help in eliminating the challenges that external auditors might face while conducting their work. Although it’s not a formal auditing process many organizations normally choose to undertake it so that the parties involved can be able to understand the expectations of the final auditing process. The general procedure for pre-assessment audit is that the registrar normally undertakes a mini audit that combines both initial and main audit process. This will require a pre-audit planning so that the registrar can cover all the aspects of the organization that will be subject to the main auditing. The registrar also sets agenda for the aspects these he intends to interrogate with the internal stakeholders of the organization. Its important proper plans are set forth before conducting a pre-assessment audit as this will enable the registrar to get the maximum information that will be vital in the main auditing process (Woodside and Aurrichio, 134).A well executed pre-assessment audit will therefore cover all the elements of the organization system including the internal controls. During the pre-assessment audit the registrar is expected to organize meetings with the management of the organization and lay down the expectations from the all exercise. The meeting sets the process off and allows the registrar to proceed with other processes. The registrar will also tour the whole organization and familiarize himself with all the processes. For the case of Abu Dhabi Distribution Company there is a need to look at the processes and the operations of the company. This will inspire understanding of the organization as a whole. It will also allow the registrar to make conclusions about the key areas that the main auditing should focus on. The next stage is normally the review of the company documents and for the purpose of auditing a lot of emphasis will be put on financial documents. The financial documents provide information about the general performance of the company and the reliability of such documents. The registrar will then conduct interviews with selected staff members who are responsible for the implementation of the organizational goals. The final stage will be a closing meeting with the management and provision of the report of cases of nonconformity. The report will allow the management to correct cases of nonconformity so that the main auditing process can be conducted smoothly (Woodside and Aurrichio, 134).

Internal audit procedure

Internal auditing has in the past two decades gained a lot of popularity in many organizations and as such its not only used to supplement the external auditing process but organizations are currently using it as a major tool for improving on its efficiency, managing risk, improving corporate governance and also prevention of fraud. Many firms have gone under owing to poor internal control systems and hence the main auditing has not done much to recover losses occasioned by poorly executed internal auditing. Internal control systems have therefore become part and parcel of the larger organizations strategy to improve on efficiency and effectiveness. Internal auditing basically tests the organizations compliance with its internally set procedures as well as those by the regulatory bodies. In this case the company will be keen on meeting its procedures and processes that are aligned to the vision and mission as well as those by the regulation and supervisory bureau. Internal audit is highly comprehensive in modern days and covers all aspects of the organization. The following steps can be used by ADDC to conduct an excellent internal audit:

Planning

Just like any other audit process the internal auditing will normally start with proper planning. In this stage the auditor will conduct a preliminary review of all the aspects of the organization and survey of key areas of the organization operations. During this stage, the internal audit director will normally inform all the departments of the organization that are concerned about the impending audit process and also explain the scope and the intention of the whole process. This communication is normally done through the engagement letter. The personnel in charge will also organize meetings with the concerned departments to lay down procedures of the internal audit as well as the areas to be covered. The planning process will also see the review of the internal control systems within the departments and preliminary surveys on all parts of the organization. This process is very important as it allows the personnel conducting the process to get all necessary information (Moeller, 82)

Field work

After gathering preliminary information the internal auditor will then embark on a field work where he will conduct transaction tests and determine whether they conform to the internal controls that were identified.This process therefore involves the confirmation of the information gathered in the planning stage. During this stage the internal auditor will engage directly with the departments involved as they discuss the findings and other concerns with regard to the internal control processes applicable to the organization. Such kinds of communications are considered to be informal as they are done before the final report is produced. They are also meant to allow the department to take corrective measures on areas of concern. This can be a massive step in preventing the severity of fraud and inaccuracies in financial reporting within the organization. After the fieldwork the auditor will make a summary report then proceed to the next stage (Moeller, 83).

Audit report

The third stage basically entails the preparation of the final audit report as per the information gathered in the field work. In this stage, the internal auditor will make use of working papers which will be well connected to audit opinion. The final report will normally comprise the audit findings, the auditors opinion and recommendations.

Client comment

The internal audit is an interactive process that involves many parties within the organization. The internal auditors make the final reports which are presented to the management for further scrutiny and commendation. The report will therefore be extensively discussed with the management and then necessary corrective measures taken. The internal auditors have an obligation to conduct follow up to ensure that all the recommendations are being complied with (Moeller, 86).

Conclusion

ADDC will be able to achieve its objectives if the company takes major steps in enforcing its internal control systems. This will be done through proper internal auditing processes as explained above. The firm is subject to interest from many stakeholders who obviously have varying objectives and hence a proper internal and external auditing process will provide solutions for the prosperity of the company.

Works cited

Moeller, Robert. Brink’s Modern Internal Auditing: A Common Body of Knowledge. US: John Wiley & Sons Inc, 2009.

Woodside, Gayle and Aurrichio, Patrick. ISO 14001 Auditing Manual. New York: McGraw-Hill, 2000.

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BusinessEssay. 2022. "Abu Dhabi Distribution Company: Auditing Processes." December 14, 2022. https://business-essay.com/abu-dhabi-distribution-company-auditing-processes/.

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BusinessEssay. "Abu Dhabi Distribution Company: Auditing Processes." December 14, 2022. https://business-essay.com/abu-dhabi-distribution-company-auditing-processes/.