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Proposal: Principles Based Auditing Standard with Sample Report

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Hexxx Minmatar	Posted - 2009.02.04 15:42:00 - [1] This is broken into two sections: 1) Auditing Guidelines for Principles-Based Audits 2) A sample Audit Report showing the result of a fictious Audit ------ Auditing Guidelines for Principles-Based Audits Important Notes: - A single person can be an auditor and an analyst, however they cannot perform both of these roles for a single IPO. - I removed "plan analysis". This is done by the community. It is the community that debates the merits of the IPO, it's always been this way and I'd prefer we keep the status quo. That said, this may be something the business analyst weighs in on. - I'll work on templates and examples for this, for now though, discuss the current outline please. Why is this important? By making audit/analysis activities clear and consistent, we can speed up and reduce the time that these activities take. When everyone knows what to expect and what information to provide, things move faster. Every IPO should have two people involved in the review: 1) An auditor 2) A business analyst These two people should produce a report with two sections: 1) An audit section 2) A business analysis section What comprises an Audit? In any audit generally speaking one is trying to gauge the merit of the plan proposed, verify facts, and use data to identify risks at the time of the offering. Each of the auditors that have come through, as pointed out by Kazou, has a different style. ItÆs because of this I think some confusion can come about from an audit and why I think some investors have come to see any audit as some sort of gold stamp of approval. An Auditor focuses on the empirical data(i.e. assets, cash, transactions,skills,etc) to determine the validity of statements made and identify any significant problems. An example would be someone wanting to start a POS business but lacking the skills for it. The areas of this are; Accounting Practices: This section would focus on the accounting practices of the OP. Do they maintain a healthy wallet; keep funds easily traceable between alts, accounts, corporate funds, etc. This speaks to their ability to properly report on how the business is doing on a monthly basis. Assets and Skills: This section would focus on verifying current holdings, isk, assets, BPOs, etc along with skills required to do what they want to do. What compromises a business analysis? Business Analysis: This section would focus on analyzing any current business under operation of the OP. An example could be myself making and offering to expand my capital business. This section would focus on analyzing my current operations and verifying or nullifying what is said by the OP. Risk Assessment: This section would point out major risks. Business analysts will likely leverage the Auditor and the Auditors findings in order to produce this section. EBANK Staff \| www.eve-bank.net
Hexxx Minmatar	Posted - 2009.02.04 15:43:00 - [2] Edited by: Hexxx on 04/02/2009 15:45:37 A sample Audit Report showing the result of a fictious Audit Audit Account Practices: After a review of of Bill's main and two alts, I can confirm that he keeps on average a minimum of 5 billion isk on Bill1 and Bill2. Bills assets are stored in clear and organized manner, Bill1 holds the BPOs and Bill2 holds the minerals. Bill's main sources the appropriate BPO and minerals for each manufacturing cycle. Bill is very organized in the way he holds assets and has a spreadsheet tracking the value of his assets based on mineral prices. Assets and Skills: Bill and his alts (Bill1 and Bill2) all possess the necessary manufacturing and research skills to accomplish the manufacturing they need to do. Bill1 has all the BPO's needed to complete the manufacturing and Bill has 5 billion in cash. Additionally, between all 3 characters there is another 10 billion isk in assets. Analysis Business Analysis: Bill has not engaged in large scale manufacturing before. His smaller efforts seem to have been successful based on available data. Risk Assessment: Bill has the skills and part of the cash needed to go after large-scale manufacturing. However, a significant risk is the apparentl lack of experience in large-scale manufacturing operations. Also, the market that Bill wants to produce in currently has mediocre volume...so low turn over is a risk as well. (working on this, will post soon) EBANK Staff \| www.eve-bank.net
Caleb Ayrania Gallente TarNec	Posted - 2009.02.04 15:46:00 - [3] As always reading your posts makes one dream of the time when EVE can do and create these things.. Must admit its coming ever closer.. Soon(tm) - Money is Love - Sometimes it just gets bend the wrong ways. Feed your Brain: Innovation Thread
Hexxx Minmatar	Posted - 2009.02.04 15:47:00 - [4] Also, I'm officially un-retired. I'm not strong enough to quit EVE apparently. EBANK Staff \| www.eve-bank.net
Slade Trillgon Masuat'aa Matari Ushra'Khan	Posted - 2009.02.04 15:50:00 - [5] Originally by: Hexxx Also, I'm officially un-retired. I'm not strong enough to quit EVE apparently. LMAO!! Welcome back and once again, nice type up. Slade Originally by: Niccolado Starwalker Please go sit in the corner, and dont forget to don the shame-on-you-hat! ≡v≡
Kazzac Elentria	Posted - 2009.02.04 15:52:00 - [6] I like Hexxx Once again, as I stated in the previous thread, I think it should be the defacto standard from here on out of two sets of eyes on any one OP with each one able to watch the other.
Forceflow Gallente Center for Advanced Studies	Posted - 2009.02.04 15:53:00 - [7] Originally by: Hexxx Also, I'm officially un-retired. I'm not strong enough to quit EVE apparently. In before some celebration I presume. Hexxx, shouldn't you include some possible standards for the release of infomation should scams occur? Also, what info would be available; should reasonably be kept private at the start and commencement of the IPO and what should be made public.
Hexxx Minmatar	Posted - 2009.02.04 16:53:00 - [8] Originally by: Forceflow Originally by: Hexxx Also, I'm officially un-retired. I'm not strong enough to quit EVE apparently. In before some celebration I presume. Hexxx, shouldn't you include some possible standards for the release of infomation should scams occur? Also, what info would be available; should reasonably be kept private at the start and commencement of the IPO and what should be made public. The question of information sharing, privacy, confidentiality, etc is something I'll address in a separate topic. This is about auditing primarily and not about what do do with that information in the case of a scam. Once we can all agree on a standard way to audit and analyze businesses, THEN we can talk about the nature of information. EBANK Staff \| www.eve-bank.net
Shar Tegral	Posted - 2009.02.04 18:13:00 - [9] As always, I approve this message.
Hexxx Minmatar	Posted - 2009.02.04 20:35:00 - [10] It should be noted; after numerous personal communications and based on the initial responses, I have moved this from a proposal to an official standard. EBANK Staff \| www.eve-bank.net
Salvo Brunel	Posted - 2009.02.04 20:59:00 - [11] I don't want to be difficult, but what does it mean for this to be 'an official standard'?
Kazzac Elentria	Posted - 2009.02.04 21:04:00 - [12] Originally by: Salvo Brunel I don't want to be difficult, but what does it mean for this to be 'an official standard'? More or less a good majority of heavy players within the secondary market agree to abide by this standard, meaning that any and all new entrants or existing players wishing to make offerings, etc.. are subject to these new standards. To Hexxx I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously.
Hexxx Minmatar	Posted - 2009.02.04 21:11:00 - [13] Originally by: Kazzac Elentria Originally by: Salvo Brunel I don't want to be difficult, but what does it mean for this to be 'an official standard'? More or less a good majority of heavy players within the secondary market agree to abide by this standard, meaning that any and all new entrants or existing players wishing to make offerings, etc.. are subject to these new standards. To Hexxx I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously. I'll get to work on this. I'll be using a similar format to my IPO template. Speaking of which...I should really update my IPO template.
Kazzac Elentria	Posted - 2009.02.04 21:16:00 - [14] Originally by: Hexxx Originally by: Kazzac Elentria Originally by: Salvo Brunel I don't want to be difficult, but what does it mean for this to be 'an official standard'? More or less a good majority of heavy players within the secondary market agree to abide by this standard, meaning that any and all new entrants or existing players wishing to make offerings, etc.. are subject to these new standards. To Hexxx I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously. I'll get to work on this. I'll be using a similar format to my IPO template. Speaking of which...I should really update my IPO template. After the template, perhaps getting a committee of volunteers as the various auditor types. From there a formal creation of an auditing group. We'll have to all agree on some type of transparency between the various participants as well. ...welcome back btw. We're like the mob, you can never leave unless its by death
YouGotRipped Ewigkeit	Posted - 2009.02.04 21:33:00 - [15] Originally by: Kazzac Elentria I like Hexxx more than Jules. You said it Kazzac. Hexxx old friend, you're a sight for sore eyes, now that the community is in good hands, I guess I can finally quit myself. Brought up in the Assembly hall, feel free to wander over and sign
Shar Tegral	Posted - 2009.02.04 21:37:00 - [16] Originally by: Kazzac Elentria I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously. The biggest attraction all of this has for me, personally, is that there will be readily available information for people on what "auditing" entails. Half of my efforts is trying to explain to people what an audit is. I do worry that it'll also be a checklist for scammers to use to "clean" their toons but the good ones do that already. On the flipside, better informed population may mean less stupidity. Not going to happen, I know, but we all have our idealistic (see stupid) dreams. So, more knowledge equals more win. My old mercenary(PVP) corp is recruiting again. Would you believe I'm giving them my signature block for free?
Kazzac Elentria	Posted - 2009.02.04 21:42:00 - [17] Originally by: Shar Tegral Originally by: Kazzac Elentria I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously. The biggest attraction all of this has for me, personally, is that there will be readily available information for people on what "auditing" entails. Half of my efforts is trying to explain to people what an audit is. I do worry that it'll also be a checklist for scammers to use to "clean" their toons but the good ones do that already. On the flipside, better informed population may mean less stupidity. Not going to happen, I know, but we all have our idealistic (see stupid) dreams. So, more knowledge equals more win. More or less what I was thinking when it popped into my head
Hexxx Minmatar	Posted - 2009.02.04 22:12:00 - [18] Originally by: Kazzac Elentria Originally by: Shar Tegral Originally by: Kazzac Elentria I think the next step after accepting this standard principle, would be to get a standard template form with some basic guidelines for the data points. KISS principles applying obviously. The biggest attraction all of this has for me, personally, is that there will be readily available information for people on what "auditing" entails. Half of my efforts is trying to explain to people what an audit is. I do worry that it'll also be a checklist for scammers to use to "clean" their toons but the good ones do that already. On the flipside, better informed population may mean less stupidity. Not going to happen, I know, but we all have our idealistic (see stupid) dreams. So, more knowledge equals more win. More or less what I was thinking when it popped into my head Updates have been made. Please provide feedback when possible.
Kazuo Ishiguro House of Marbles Zzz	Posted - 2009.02.04 23:25:00 - [19] For clarity, it would be a good idea to sort the suggested questions into 'Audit' and 'Business Analysis' sections. I'm not sure that a 'POS business' is good example to use for someone lacking skill requirements. Invention and capital ship production are better examples of more SP-intensive ventures. I think a business analysis need not be confined to ongoing operations. If records exist, it is generally worth reporting on how the subject's previous ventures fared, and what lessons were learned from them. For the purposes of this discussion, I presume we're considering auditing as being distinct from background checking (i.e. character sales, employment & contract history, checks against lists of known scammers etc). --- Can't afford that BPO? Look here. 20:1 mineral compression The EVE f@h team
Hexxx Minmatar	Posted - 2009.02.05 00:08:00 - [20] Originally by: Kazuo Ishiguro For clarity, it would be a good idea to sort the suggested questions into 'Audit' and 'Business Analysis' sections. I'm not sure that a 'POS business' is good example to use for someone lacking skill requirements. Invention and capital ship production are better examples of more SP-intensive ventures. I think a business analysis need not be confined to ongoing operations. If records exist, it is generally worth reporting on how the subject's previous ventures fared, and what lessons were learned from them. For the purposes of this discussion, I presume we're considering auditing as being distinct from background checking (i.e. character sales, employment & contract history, checks against lists of known scammers etc). Point #1 - The example was meant to be very generic. The example should not be too specific in my opinion. Point #2 - I believe the background checking should be contained within the Business Analysis - Risk section. I'll update accordingly. Will also update section headers for greater clarity.
Kazzac Elentria	Posted - 2009.02.05 01:30:00 - [21] I see Kazou already got to some points I was going to make before I got forum access back.
Hexxx Minmatar	Posted - 2009.02.05 01:49:00 - [22] Originally by: Kazzac Elentria I see Kazou already got to some points I was going to make before I got forum access back. Did I address them all? EBANK Staff \| www.eve-bank.net
Kazzac Elentria	Posted - 2009.02.05 01:50:00 - [23] Originally by: Hexxx Originally by: Kazzac Elentria I see Kazou already got to some points I was going to make before I got forum access back. Did I address them all? For the most part, didn't have the amount of time I wanted to read over it night (corp mates keep a calling.. ahhh the life of the single director) so I'll read it again in the morning and post my comments.
Highlord Nicolai Amarr GK inc. R.U.R.	Posted - 2009.02.05 02:32:00 - [24] Originally by: Hexxx Also, I'm officially un-retired. I'm not strong enough to quit EVE apparently. Ahh mate, good to have you back amoung us. I'm not even sure if you remember me, it has been a good year or two On another note, did Mat quit for good?
Ray McCormack hirr	Posted - 2009.02.05 10:24:00 - [25] I'm going to start making all my posts OFFICIAL. [WTS] Tech II Component BPO Sets
Hexxx Minmatar	Posted - 2009.02.05 11:50:00 - [26] Originally by: Ray McCormack I'm going to start making all my posts OFFICIAL. Go for it.
YouGotRipped Ewigkeit	Posted - 2009.02.05 15:39:00 - [27] Originally by: Hexxx Originally by: Ray McCormack I'm going to start making all my posts OFFICIAL. Go for it. Honestly guys, I don't think labeling your posts OFFICIAL quite does it. How about forming a legal party and proclaiming your posts to be the infallible words of the arbitration panel itself?
Viilaa Caldari OH Corp	Posted - 2009.02.05 15:46:00 - [28] Why is it when threads like this one pop up it makes me want to run an IPO Now I just need an idea and a way to make my current business partners not kill me for doing it.. Viilaa
Hexxx Minmatar	Posted - 2009.02.05 16:21:00 - [29] Originally by: YouGotRipped Originally by: Hexxx Originally by: Ray McCormack I'm going to start making all my posts OFFICIAL. Go for it. Honestly guys, I don't think labeling your posts OFFICIAL quite does it. How about forming a legal party and proclaiming your posts to be the infallible words of the arbitration panel itself? You contributions have been noted in the OP.
Kazzac Elentria	Posted - 2009.02.05 16:34:00 - [30] Originally by: Hexxx Originally by: Kazzac Elentria I see Kazou already got to some points I was going to make before I got forum access back. Did I address them all? Here are the only things I would add Under Account Practices Does the Manager have access to corporate funds beyond the IPO (IE a director access in an alliance for example), can they easily differentiate between the two and keep them separate? Under Business Analysis Is the business they run profitable now, in the foreseeable future? Thats it, with those in there its gold and I say we start working towards the next step. Formatting some sort of template with some guidelines on the entries.

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