CHAPTER 25 Assurance Services: Internal Auditing and Comprehensive Auditing
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Transcript of CHAPTER 25 Assurance Services: Internal Auditing and Comprehensive Auditing
25 - 1Copyright 2003 Pearson Education Canada Inc.
CHAPTER 25Assurance Services: Internal Auditing
and Comprehensive Auditing
25 - 2Copyright 2003 Pearson Education Canada Inc.
What is What is internal auditinginternal auditing??
25 - 3Copyright 2003 Pearson Education Canada Inc.
Many organiza-tions employinternal auditors to help the organ-ization achievegreater efficiency and effectiveness.
What is What is internal auditinginternal auditing??
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Many organiza-tions employ internal auditors to help the organ-ization achievegreater efficiency and effectiveness.
What is What is internal auditinginternal auditing??
In somecorporations, internal auditors
also determine whether the financialstatements are fairly presented.
25 - 5Copyright 2003 Pearson Education Canada Inc.
How do How do internalinternal and and externalexternal auditing differ? auditing differ?
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Internal auditors usually focus on improving the efficiency andeffectiveness of their employer.
How do How do internalinternal and and externalexternal auditing differ? auditing differ?
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Internal auditors usually focus onimproving the efficiency and effectiveness of their employer.
External auditors (public accountingfirms) usually focus on the fairness ofthe financial statements of their clients.
How do How do internalinternal and and externalexternal auditing differ? auditing differ?
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There may be There may be very littlevery little overlap overlap between the responsibilities of between the responsibilities of internal and external auditors.internal and external auditors.
internalauditors
externalauditors
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internalauditors
externalauditors
Are external auditors allowed to use Are external auditors allowed to use internal auditors for direct assistanceinternal auditors for direct assistance
during an audit of financial statements?during an audit of financial statements?
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Are external auditors allowed to use Are external auditors allowed to use internal auditors for direct assistanceinternal auditors for direct assistance
during an audit of financial statements?during an audit of financial statements?
YES,if external auditors are
confident of internal auditors’:- competence- independence- objectivity
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WhyWhy would an audit client be willing to would an audit client be willing toallow external auditors to use internalallow external auditors to use internal
auditors for direct assistanceauditors for direct assistanceduring an audit of financial statements?during an audit of financial statements?
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WhyWhy would an audit client be willing to would an audit client be willing toallow external auditors to use internalallow external auditors to use internal
auditors for direct assistanceauditors for direct assistanceduring an audit of financial statements?during an audit of financial statements?
loweraudit fees
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What is What is operational auditingoperational auditing??
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What is What is operational auditingoperational auditing??
The purpose ofoperational auditing is
to enable an organizationto achieve greatereffectiveness and
efficiency.
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What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
25 - 16Copyright 2003 Pearson Education Canada Inc.
What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
- purpose of the auditoperational
auditingfinancialauditing
purpose? purpose?
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What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
- purpose of the auditoperational
auditingfinancialauditing
purpose:promotion ofefficiency andeffectiveness
purpose:determinationof statement
fairness
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What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
- purpose of the audit- distribution of the reports
operationalauditing
financialauditing
distribution? distribution?
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What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
- purpose of the audit- distribution of the reports
operationalauditing
financialauditing
distributed tomanagement
distributedto statement
users
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What are the differences What are the differences between between operational auditingoperational auditing
and and financial auditingfinancial auditing??
- purpose of the audit- distribution of the reports- inclusion of nonfinancial areas
Operational auditscover any aspect of efficiency
and effectiveness in anorganization.
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What are the types of What are the types of operational auditsoperational audits??
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What are the types of What are the types of operational auditsoperational audits??
- a functional audit deals with one or more functions in an organization, e.g., cash receipts
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What are the types of What are the types of operational auditsoperational audits??
- a functional audit deals with one or more functions in an organization- an organizational audit deals with an entire organization and how efficiently and effectively functions interact
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What are the types of What are the types of operational auditsoperational audits??
- a functional audit deals with one or more functions in an organization- an organizational audit deals with an entire organization and how efficiently and effectively functions interact- special assignments arise at manage- ment’s request and can take a variety of forms
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What are the most What are the most important qualities of an important qualities of an
operational auditoroperational auditor??
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What are the most What are the most important qualities of an important qualities of an
operational auditoroperational auditor??
- independence
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What are the most What are the most important qualities of an important qualities of an
operational auditoroperational auditor??
- independence- competence
25 - 28Copyright 2003 Pearson Education Canada Inc.
What are the phases of What are the phases of an an operational auditoperational audit??
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What are the phases of What are the phases of an an operational auditoperational audit??
- the planning phase is similar to that of a financial audit except for the extreme diversity among operational audits
December
?
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What are the phases of What are the phases of an an operational auditoperational audit??
- the planning phase is similar to that of a financial audit except for the extreme diversity among operational audits- the evidence accumulation and evalua- tion phase is also similar to that of a financial audit
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What are the phases of What are the phases of an an operational auditoperational audit??
- the evidence accumulation and evaluation phase is also similar to that of a financial audit- the reporting and evaluation phase differs from that of a financial audit because the diversity of audits results in carefully-worded reports displaying a lack of standardized wording
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Which organizations Which organizations must follow the Public must follow the Public Sector Accounting and Sector Accounting and
Auditing Board’s Auditing Board’s Recommendations?Recommendations?
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Which organizations must Which organizations must follow the PSAAB follow the PSAAB
Recommendations?Recommendations?Public Sector Entities:- federal, provincial, territorial and local
governments- government organizations- school boards
Not:- business-type organizations- government not-for-profit organizations
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What is a Value-for-What is a Value-for-Money Audit?Money Audit?
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What is a Value-for-Money What is a Value-for-Money Audit?Audit?
General Standards1. the VFM audit team should collectively
possess the necessary knowledge and competence
Differs from GAAS
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What is a Value-for-Money What is a Value-for-Money Audit?Audit?
General Standards1. the VFM audit team should collectively
possess the necessary knowledge and competence
2. Due care and an objective state of mind
Similar to GAAS
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What is a Value-for-Money What is a Value-for-Money Audit?Audit?
Examination Standards1. adequate planning and proper execution;
proper supervision of team members2. obtain sufficient appropriate audit
evidence
Similar to GAAS
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What is a Value-for-Money What is a Value-for-Money Audit?Audit?
Examination Standards1. adequate planning and proper execution;
proper supervision of team members2. obtain sufficient appropriate audit evidence
3. criteria for evaluating matters subject to audit should be identified and their suitability assessed
Similar to GAAS
Differs from GAAS
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What is a Value-for-Money What is a Value-for-Money Audit?Audit?
Reporting StandardsReport should:- describe the objectives and the scope of audit,
including limitations- state examination was performed in accordance
with recommended standards and included such tests and other procedures as considered necessary- identify the criteria and describe the findings- state the conclusions
Differs from GAAS