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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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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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Generally Accepted GovernmentGenerally Accepted GovernmentAuditing Standards (GAGAS)Auditing Standards (GAGAS)
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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Generally Accepted GovernmentGenerally Accepted GovernmentAuditing Standards (GAGAS)Auditing Standards (GAGAS)
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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Generally Accepted GovernmentGenerally Accepted GovernmentAuditing Standards (GAGAS)Auditing Standards (GAGAS)
Reporting Standards for FinancialAudits
Reporting views of responsible officials
Reporting privileged and confidential
information
Report issuance and distribution
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Generally Accepted GovernmentGenerally Accepted GovernmentAuditing Standards (GAGAS)Auditing Standards (GAGAS)
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