ISO Standards and Audit: A Case Study About ISO 31000

ISO Standards and Audit: A Case Study About ISO 31000

Alcina Sena Portugal Dias (Instituto Politécnico do Porto, Portugal) and Madalena Maria Ribeiro Magalhaes (Instituto Politécnico do Porto, Portugal)
Copyright: © 2019 |Pages: 25
DOI: 10.4018/978-1-5225-7356-2.ch005

Abstract

Standards are applicable to any kind of activity and could be defined, in a general way, as an activity aiming to apply an ordered system to repetitive functions that take place in the context of industry, technology, science, and economy. Auditing is deeply connected to the implementation of any standard, and this chapter aims to do its connection. Standardization can stimulate international comparability eliminating obstacles arising from some different national practices in accounting and in auditing using IFRS and ISA, in risk analysis using ERM or ISO 31000, in people's safety, in the product or in the environment. A case study about ISO 31000 in a municipality where IFRS and ISA are followed and ISO 9001, 14001, 18000 are a reality will frame this issue. ISO 26000 about corporate social responsibility will be the new future challenge.
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Background

Over the last few years, an acceleration of the process of standardization concerning business management has taken place in an economic context characterized by a marked process of globalization and economic integration of markets. Under this scope of analysis, many studies have been undertaken considering the role of standards that are, in many cases, non-tariff barriers to international trade relationships.

As various authors have emphasized, while tariff barriers are becoming lower and lower, non-tariff barriers (i.e., technical standards and regulations affecting the requirements for products, services and, indirectly, production processes) are acquiring increasing importance (Blanco & Bustos, 2004). In short, the importance of international trade in the global economy has grown dramatically over the last two decades, but while tariffs and quantitative restrictions on trade have been lowered or eliminated, barriers of a different nature have had an increasingly restrictive effect on trade, especially in the case of a broad range of technical standards (Dias, 2014; Giovannucci & Ponte, 2005; Henson & Loader, 2001).

Standardization has been crucial for the development of the industrial society (Blind, 2004). At its origins, in the early 20th century, standardization was introduced in order to curb an uneconomical divergence of components, parts and supplies and to foster their interchangeability so as to facilitate mass production and the repair and maintenance of products and services.

However, standardization has gone further than this and comes to be applied to the very management processes and systems by which products and services are produced (Antonelli, 1999; Brunson & Jacobsson, 2000; Dias, 2014; Heras, 2006). Standards-based management is a research field that has received considerable attention in recent years, due to the great success experienced by management standards all over the world. Therefore, it is important to review the different approaches of the study of standardization in a management context, in order to try to synthesize and, thus, improve the academic knowledge about these interesting management tools, within the interest of the various different stakeholders involved (e.g., managers, consultants, policy makers and researchers). It is well known from the perspective of the executives of organizations that all these standards need an accurate plan of audit in order to test their fulfillment. This way, audit must be considered as a proactive and adaptive issue of analysis and assurance that should make part of the management of any organization.

Key Terms in this Chapter

Standards: A reference or a benchmark used for any type of activity. Financial and nonfinancial management should use them. From World Trade Organizations we know that the global market transaction has to comply with TBT agreement – Technical Barriers to Trade. So there are lot of applicable standards to products and services. Only the ones considering the financial management of an organization will be considered.

Enterprise Risk Management (ERM): A management tool related to the prevention and mitigation of Risk. ERM is a kind of risk approach applicable to a top down process of management pertaining to any company. ERM makes part of the mission, vision, and strategy of the organization and is considered across the hierarchy established in the organization.

Maia (Municipality): The municipality of Maia is headquartered in the city of Maia, located in the District of Porto, Portugal. It is one of the 18 municipalities that make up the Metropolitan Area of Porto which, in a whole, represents 2040 Km2 and 1,8 million people. The population related to Maia municipality management is more than 100,000 inhabitants.

International Standards on Audit: References established by International Federation of Accountants (USA) so that the financial audit achieved worldwide, follow them. If the audit to be developed upon the financial statements of the organizations follow the same procedures across the world, the auditor´s opinion will be recognized by the global market.

Implementation of ISO 31000: Depends on the culture of the organization mainly on a risk perspective allocated to the top management. The process will start with the definition of risk and its scope of analysis, the associated prevention and mitigation plan and at last the risk execution. All these steps need to be connected to the top of the organization´s hierarchy. Risk procedures are needed.

ISO 31000: Reference established by International Organization for Standardization that deals with risk management. The definition, scope analysis, identification, and mitigation plan related to the risk context, in any organization, will be considered. ISO 31000 is easier to be implemented in organizations that have previously adopted an ISO 9001.

International Financial Reporting Standards: References established by International Accounting Standards Board (UK), as to the accounting register, to be in force worldwide. Their application aims to get the Global Financial Harmonization. If all the countries use these standards to register their transactions the consequent financial statements will be comparable.

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