Having knowledge about the preparation of the audit universe is very significant. Audit Universe can help to identify appropriate internal audit coverage that the chief audit executive can then prioritize. An audit universe is the cumulative organization of auditable ‘components’ – sometimes also called auditable areas, units, or entities that help in the preparation of the internal audit plan.
The Importance of the Preparation of the Audit Universe
An audit universe has proven to be beneficial for many organizations. One reason is that it can help to inform a company’s risk management practices and strategic internal audit plan. Preparation of the audit universe can develop an audit universe that can aid the mapping of various risks, internal controls, and regulations to each business unit.
In most organizations, the potential audit universe is vast and includes an organization’s operating entities such as accounts payable, accounts receivable, cash management, customer service environmental, finance, general services, health and safety, human resources, inventory management, legal, locations, manufacturing, marketing, payroll, products and services, procurement/purchasing, research and development, sales and collections, security and production/operations.
Preparation of the Audit Universe Plan
The audit universe in a risk-based frame is not construed merely by operating entities. It also besets the organization’s strategic plan and the relevant controls that management has put in place to mitigate risks, meet organizational goals and objectives, and ensure customer needs are being fulfilled.
Once an audit plan is defined, audits conducted during the year are prioritized based on the risk assortment of each audit. Some audits may also be included in the plan at the request of the management. Not all functions or audits need to be carried each year. Rather risky areas need to be prioritized though some areas might be risks and may need to be audited every year.
An audit universe is a collection of potential audit activities to be performed by the internal audit function. It is made up of auditable entities, processes, systems, and activities. Keeping an audit universe is not a requirement of professional audit practice.