Chapter 21 Internal, Operation and Governmental Auditing

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Modern Auditing:Modern Auditing:Assurance Services and the IntegrityAssurance Services and the Integrity

of Financial Reporting, 8of Financial Reporting, 8ththEditionEdition

William C. BoyntonWilliam C. BoyntonCalifornia Polytechnic StateCalifornia Polytechnic StateUniversity at San Luis ObispoUniversity at San Luis Obispo

Raymond N. JohnsonRaymond N. JohnsonPortland State UniversityPortland State University

Chapter 21 Internal, Operational, and GovernmentalAuditing


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Chapter OverviewChapter Overview


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Internal Auditing DefinedInternal Auditing Defined

Internal

Independent and objective

Systematic, disciplined approach

Helps and organization accomplishits objectives


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Internal AuditingInternal Auditing

Evolution of Internal Auditing

IIA Code of Ethics

IIA Attribute and Performance

StandardsAttribute Standards

Performance Standards

Implementation Standards


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Relationship with ExternalRelationship with ExternalAuditorsAuditors


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Operational Auditing DefinedOperational Auditing Defined

Systematic process

Evaluating an organizations operations

Effectiveness, efficiency, and economy ofoperations

Reporting to appropriate persons

Recommendations for improvement


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Phases of an Operational AuditPhases of an Operational Audit

Select Auditee

Plan Audit

Perform Audit

Report Findings

Perform Followup


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Financial Statements v.Financial Statements v.Operational AuditsOperational Audits


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Study BreakStudy Break

1.This part of the internal auditingdefinition states the auditors judgmenthas value when it is free of bias.

A.InternalB.Independent and objective

C.Systematic, disciplined approach

D.Helps an organization accomplish its

objectives

B. Independent and objective


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2.These IIA Attribute and Performancestandards describe the nature ofinternal audit services and provide

quality criteria against which theperformance of these services can bemeasured.

A.Attribute Standards

B.Performance Standards

C.Implementation Standards

D.None of the above

B. Performance Standards


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3.Which of the following is not aphase of the operational audit?

A.Select auditee

B.Perform audit

C.Report findings to stockholders

D.Perform followup

C. Report findings to stockholders


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Types of Government AuditsTypes of Government Audits

Financial Audits

Attestation Engagements

Performance Audits


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Generally Accepted GovernmentGenerally Accepted GovernmentAuditing Standards (GAGAS)Auditing Standards (GAGAS)

General Standards

Independence

Professional judgment

Competence

Quality Control and Assurance


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Fieldwork Standards for Financial AuditsAuditor communication

Considering the results of previous audit andattestation engagements

Detecting material misstatements resultingfrom violations of contract provisions or grant

agreements, or from abuse

Developing elements of a finding

Audit documentation


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Reporting Standards for Financial Audits

Reporting auditors compliance with GAGAS

Reporting on internal control and oncompliance with laws, regulations, andprovisions of contracts or grant agreements

Reporting deficiencies in internal control,fraud, illegal acts, violations of provisions ofcontracts or grand agreements, and abuse


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Reporting Standards for FinancialAudits

Reporting views of responsible officials

Reporting privileged and confidential

information

Report issuance and distribution


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Reporting on Compliance with Lawsand Regulations

Reporting on Internal Control


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The Single Audit ActThe Single Audit Act

Objectives of the Act

Improve financial management

Establish uniform requirements for audits

Promote efficient and effective use of auditresources

Ensure reliance and usage of audit workcompleted


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The Single Audit ActThe Single Audit Act

Applicability and Administration

Federal Financial Assistance

Major Programs

Nonmajor Programs

Cognizant Agency


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Scope of an Audit Under theScope of an Audit Under theSingle Audit ActSingle Audit Act

GeneralFinancial Statements

Internal Controls

ComplianceAudit Followup

Reporting RequirementsOpinion on Financial StatementsReport on Internal Control

Report on Compliance

Schedule of Findings and Questioned Costs


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4.This type of government audit concernexamining, reviewing, or performingagreed-upon procedures on a subject

matter or an assertion about a subjectmatter and reporting on the results.

A.Financial audits

B.Attestation engagements

C.Performance auditsD.Compliance audits

B. Attestation engagements


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5.Within the General Standards ofGAGAS, this standard states that staffassigned to perform the audit orattestation should collectively possessadequate professional competence forthe tasks required.

A.Independence

B.Professional judgment

C.Competence

D.Quality Control and Assurance

C. Competence


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6.This act established the concept of asingle organizationwide governmentaudit encompassing both financial and

compliance audits.A.Securities Act of 1933

B.Securities Act of 1934

C.Single Audit Act

D.None of the above

C. Single Audit Act

Documents

Chapter 21 Internal, Operation and Governmental Auditing