Auditing Major Projects

Day 1 Understanding Project Risk

Why projects fail

• Is risk an uncertainty or a surprise?
• Something that can go wrong or failure to get things right?
• Risk cultures and the impact on project delivery
• Why projects often fail.
• OGC paper – common causes of project failure
• The need for a formal approach to risk management
• Risk appetite and the implications for projects
• Selling the benefits to top management
• High profile project failures and the lessons to learn
• Exercise 1 Why projects fail

The major project risks

• Business benefit poorly defined
• Scope of the project poorly defined
• Project sponsor not committed to the project
• Difficult to engage business functions or partners
• Lack of project management experience
• Unclear or inconsistent PM processes
• Business requirements unclear or changing all the time
• Technical requirements complex or new
• Complex system interfaces
• Unrealistic timescales
• Man hours required very extensive over short time windows
• Long estimated project duration
• Type of project new to the business
• High dependency on outside parties (consultants, subcontractors)
• Businesses processes require major change
• Unfamiliar project technology
• Heavy customisation of packaged solutions
• The 10m golden rules of project management
• Exercise 2 The key project risks check-list

Project Risk Identification and Evaluation

• Approaches and techniques
• How to establish a risk workshop process
• The need for effective facilitation
• Facilitation skills
• Establishing workshops
• The use of diagnostic questions and thought-provokers
• The pros and cons of using data capture technology
• Other methods of risk identification
• Monte Carlo Simulations
• Bayesian networks
• Scenario planning
• RAMP methodology
• How to identify, sift and group the risks
• Measuring the consequences and the likelihood of occurrence of each risk
• The use of risk matrices to prioritise the risks.
• Exercise 3: Risk and reward

The business perspective

• Different types of project and their implications
• Selection of Professional Services providers
• Financial planning consultants
• Engineering firms
• Design/Construct providers
• Construction managers
• Facilities management
• The growing popularity of turnkey approaches
• Choice of contractor
• Principal contract terms
• Other legal and regulatory requirements
• Financing the project
• Choice of methodology
• Selecting the project manager
• Procurement process
• Exercise 4 The business benefits

Auditing major projects

• IIA new paper – Introduction to project auditing
• Assessing the project life cycle
• The need to assess the risk maturity of the project
• Commitment to risk management
• Reviewing project risk registers
• The questions to ask
• Assessing the project risk appetite
• Reviewing the effectiveness of the risk management process adopted
• Determining which risks should be concentrated on in the audit
• Management evaluation of mitigation controls
• Identification of risk exposures
• Dealing with the exposures (the 4 Ts – terminate, tolerate, treat or transfer)
• Reviewing risk ownership and identifying gaps
• Exercise 5: The audit involvement in the project lifecycle

Day 2 Auditing major projects

Strategic Project Audit Planning

• Determining which projects to audit, to which frequency and to what depth
• Determining the level of assurance required
• Determining the level of assurance that can be provided
• Exercise 6: Determining project audit priorities

Project auditing in practice

• Determining the scope of a RBA assignment
• Whether objectives are being delivered efficiently and effectively
• Whether risks have been identified, evaluated and are being managed
• Whether controls mitigate the risks effectively
• Where risk exposures exist action is being taken to improve controls
• Whether appropriate management oversight is in place
• Exercise 7: Scoping a RBA assignment of a major project

Selecting a Contractor

• The tendering process
• Success criteria
• Use of approved organisations
• Categories of Risk in procurement
• Partnering and Risk
• Contract negotiation
• Contract award
• Exercise 8: Risks in Contractor selection

The project in progress

• Design methodology
• Site environment
• Measurement and valuation methods
• Evaluating the Quantity Surveyor process
• Variations and claims
• Performance management
• Payments
• Liquidated damages
• Performance guarantees
• Sub-contractors
• Contract finalisation
• Exercise 9: Auditing the project during the ‘active’ phase

Cost control and accounting

• The project budget
• Cost control and forecasting
• Cost accounting
• Schedule control
• Dealing with cost over-runs
• Exercise 10: Auditing the project costs

Handover and post audit

• Commissioning risks
• Completion certificates
• Maintenance agreements
• PFI contracts
• Post completion reviews
• Learning from successes and mistakes
• Exercise 11: Completing a post audit of a project

Auditing systems under development

• Why auditing systems under development need not compromise your wider audit role
• The need to audit at key stages – not to be part of the project team
• Ensuring that the processes and policies are complied with
• Determining the points of potential failure
• Ensuring controls are not bypassed – due to time constraints
• Ensuring risks are identified at the start and regularly reviewed
• Ensuring sufficient end user involvement
• Audit stages and the questions to ask
• Exercise 12 – Challenges of systems development audit