{"id":888,"date":"2020-01-21T13:38:30","date_gmt":"2020-01-21T13:38:30","guid":{"rendered":"https:\/\/alminawi.com\/?p=888"},"modified":"2025-12-07T18:21:33","modified_gmt":"2025-12-07T18:21:33","slug":"tts-series-e-internal-audit-fieldwork-and-evidence-collection-episode-04-observation","status":"publish","type":"post","link":"https:\/\/e.americanpro.org\/?p=888","title":{"rendered":"T&#038;Ts Series E, Internal Audit, Fieldwork and Evidence Collection, Episode 04: Observation"},"content":{"rendered":"<p data-start=\"95\" data-end=\"676\"><strong data-start=\"95\" data-end=\"131\">1. Introduction to the Technique<\/strong><br data-start=\"131\" data-end=\"134\" \/><strong data-start=\"134\" data-end=\"149\">Observation<\/strong> is a valuable audit technique that involves watching a process or control being performed in real time. It allows auditors to see what actually happens\u2014not just what is written in procedures. For internal auditor <strong data-start=\"363\" data-end=\"372\">Auren<\/strong> at <strong data-start=\"376\" data-end=\"389\">ACME Corp<\/strong>, observation provides an unfiltered view of operations and control behavior, helping identify potential non-compliance, inefficiencies, or workarounds. It\u2019s especially effective in high-risk, manual, or operational areas such as inventory handling, cash processing, and access controls.<\/p>\n<p data-start=\"678\" data-end=\"801\"><strong data-start=\"678\" data-end=\"732\">2. Template for Applying the Observation Technique<\/strong><br data-start=\"732\" data-end=\"735\" \/>To apply observation effectively, auditors can follow these steps:<\/p>\n<ul data-start=\"802\" data-end=\"1398\">\n<li data-start=\"802\" data-end=\"904\">\n<p data-start=\"804\" data-end=\"904\"><strong data-start=\"804\" data-end=\"829\">Define the Objective:<\/strong> What process or control are you observing? What are you trying to confirm?<\/p>\n<\/li>\n<li data-start=\"905\" data-end=\"1011\">\n<p data-start=\"907\" data-end=\"1011\"><strong data-start=\"907\" data-end=\"927\">Plan the Timing:<\/strong> Observe the activity at the right time (e.g., during peak operations or month-end).<\/p>\n<\/li>\n<li data-start=\"1012\" data-end=\"1106\">\n<p data-start=\"1014\" data-end=\"1106\"><strong data-start=\"1014\" data-end=\"1041\">Notify or Don\u2019t Notify:<\/strong> Decide whether to perform the observation overtly or discreetly.<\/p>\n<\/li>\n<li data-start=\"1107\" data-end=\"1211\">\n<p data-start=\"1109\" data-end=\"1211\"><strong data-start=\"1109\" data-end=\"1135\">Document What You See:<\/strong> Record steps taken, tools used, timing, and any deviations from procedures.<\/p>\n<\/li>\n<li data-start=\"1212\" data-end=\"1302\">\n<p data-start=\"1214\" data-end=\"1302\"><strong data-start=\"1214\" data-end=\"1245\">Compare with Documentation:<\/strong> Check if the observed behavior matches written policies.<\/p>\n<\/li>\n<li data-start=\"1303\" data-end=\"1398\">\n<p data-start=\"1305\" data-end=\"1398\"><strong data-start=\"1305\" data-end=\"1334\">Follow Up with Questions:<\/strong> Clarify unclear steps or anomalies with staff post-observation.<\/p>\n<\/li>\n<\/ul>\n<p data-start=\"1400\" data-end=\"1753\"><strong data-start=\"1400\" data-end=\"1459\">3. Practical Example: ACME\u2019s Physical Inventory Process<\/strong><br data-start=\"1459\" data-end=\"1462\" \/><strong data-start=\"1462\" data-end=\"1475\">CEO Liora<\/strong> is concerned about increasing inventory write-offs at ACME\u2019s main warehouse. She assigns <strong data-start=\"1565\" data-end=\"1574\">Auren<\/strong> to assess the effectiveness of the inventory control procedures. Auren decides to conduct an on-site <strong data-start=\"1676\" data-end=\"1691\">observation<\/strong> of the <strong data-start=\"1699\" data-end=\"1735\">physical inventory count process<\/strong> during month-end.<\/p>\n<ul data-start=\"1755\" data-end=\"2378\">\n<li data-start=\"1755\" data-end=\"1857\">\n<p data-start=\"1757\" data-end=\"1857\"><strong data-start=\"1757\" data-end=\"1771\">Objective:<\/strong> Confirm whether inventory is being counted according to ACME\u2019s documented procedures.<\/p>\n<\/li>\n<li data-start=\"1858\" data-end=\"2007\">\n<p data-start=\"1860\" data-end=\"2007\"><strong data-start=\"1860\" data-end=\"1871\">Timing:<\/strong> Auren schedules the visit during the actual cycle count, coordinating with <strong data-start=\"1947\" data-end=\"1971\">Project Manager Aven<\/strong>, who oversees warehouse operations.<\/p>\n<\/li>\n<li data-start=\"2008\" data-end=\"2378\">\n<p data-start=\"2010\" data-end=\"2132\"><strong data-start=\"2010\" data-end=\"2024\">Execution:<\/strong> Auren observes two warehouse staff as they count and record items in Zone B of the facility. He notes that:<\/p>\n<ul data-start=\"2135\" data-end=\"2378\">\n<li data-start=\"2135\" data-end=\"2211\">\n<p data-start=\"2137\" data-end=\"2211\">The counters don\u2019t refer to the system inventory printout during counting.<\/p>\n<\/li>\n<li data-start=\"2214\" data-end=\"2295\">\n<p data-start=\"2216\" data-end=\"2295\">Discrepancies are jotted on sticky notes instead of being logged in the system.<\/p>\n<\/li>\n<li data-start=\"2298\" data-end=\"2378\">\n<p data-start=\"2300\" data-end=\"2378\">Supervisor sign-offs are done after the fact, not immediately after the count.<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p data-start=\"2380\" data-end=\"2557\">Auren discreetly compares what he observed to the inventory SOP and finds three control gaps: lack of real-time reconciliation, informal documentation, and post-hoc supervision.<\/p>\n<p data-start=\"2559\" data-end=\"2864\">After the count, Auren debriefs with Aven and the warehouse lead. They admit the process was rushed due to staffing issues. Auren includes his observations\u2014with timestamps, notes, and photographs\u2014in the audit file and recommends procedural retraining and digital entry tools to support real-time tracking.<\/p>\n<p data-start=\"2866\" data-end=\"3153\" data-is-last-node=\"\" data-is-only-node=\"\">This use of <strong data-start=\"2878\" data-end=\"2893\">observation<\/strong> provided critical, firsthand evidence that written documentation alone wouldn\u2019t reveal. When used properly, observation uncovers operational realities and strengthens audit credibility by tying findings directly to what was seen and experienced on the ground.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>1. Introduction to the TechniqueObservation is a valuable audit technique that involves watching a process or control being performed in real time. It allows auditors to see what actually happens\u2014not just what is written in procedures. For internal auditor Auren at ACME Corp, observation provides an unfiltered view of operations and control behavior, helping identify [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":800,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-888","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tt-internal-audit"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/e.americanpro.org\/wp-content\/uploads\/2025\/06\/7.png","_links":{"self":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/888","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=888"}],"version-history":[{"count":1,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/888\/revisions"}],"predecessor-version":[{"id":1305,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/posts\/888\/revisions\/1305"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=\/wp\/v2\/media\/800"}],"wp:attachment":[{"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=888"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=888"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/e.americanpro.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=888"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}