Audit Practice and Procedures II - Week 1
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Questions and Answers

What is the primary purpose of auditing?

  • To establish new management regulations
  • To provide assurance about the conduct or performance of others (correct)
  • To eliminate the need for internal controls
  • To increase the workload of the organization

    • What does the term 'audit' derive from?

  • The Latin word 'audire' (correct)
  • The French word 'auditoire'
  • The English word 'audit'
  • The Greek word 'audire'

    • Which of the following is NOT a function of the audit process?

  • Provides objective insight
  • Invents new accounting standards (correct)
  • Evaluates risks and protects assets
  • Ensures legal compliance

    • What distinguishes external auditors from internal auditors?

    <p>External auditors are independent firms hired by the organization</p> Signup and view all the answers

    According to Flint, why does the audit function exist?

    <p>To provide information or reassurance to those who cannot obtain it themselves</p> Signup and view all the answers

    Which of the following is NOT an aspect of the audit function?

    <p>Reduces the transparency of financial information</p> Signup and view all the answers

    What role does auditing play in organizational accountability?

    <p>It enables the reinforcement of accountability and control</p> Signup and view all the answers

    Which statement best reflects the utility of auditing as described by Flint?

    <p>Auditing is fundamentally a utilitarian practice.</p> Signup and view all the answers

    What year was the independent office of the Auditor General established in Jamaica?

    <p>1851</p> Signup and view all the answers

    Which section of the Constitution pertains to the functions of the Auditor General?

    <p>Section 122(1)</p> Signup and view all the answers

    What is one of the primary responsibilities of the Auditor General as per the Financial Administration and Audit Act?

    <p>Assessing the effectiveness of financial management systems</p> Signup and view all the answers

    What is the duty of the Auditor General concerning public money expenditures?

    <p>To ascertain that public money conforms to governing authority</p> Signup and view all the answers

    How many Auditor Generals had served before the current one, Pamela Monroe Ellis?

    <p>Twelve</p> Signup and view all the answers

    What does the Auditor General have to ascertain about the accounts maintained by the government?

    <p>They are being faithfully and properly kept</p> Signup and view all the answers

    What is an essential role of the Auditor General in relation to government property?

    <p>Safeguarding control of government property</p> Signup and view all the answers

    Which of the following is NOT a duty of the Auditor General?

    <p>Determining the salaries of government employees</p> Signup and view all the answers

    What is the primary responsibility of external auditors?

    <p>To inspect clients' accounting records and assess financial statement fairness</p> Signup and view all the answers

    Which statement best describes auditor independence?

    <p>The ability of auditors to maintain unbiased evaluations</p> Signup and view all the answers

    What role do internal auditors play in a company?

    <p>They conduct independent evaluations of financial and operational activities</p> Signup and view all the answers

    What is the primary role of external auditors?

    <p>To provide assurance that financial statements are materially correct</p> Signup and view all the answers

    What is meant by accountability in a business context?

    <p>The obligation to report on activities and accept responsibility</p> Signup and view all the answers

    Which accounting standards do external auditors follow in the U.S.?

    <p>Generally Accepted Accounting Principles (GAAP)</p> Signup and view all the answers

    How does corporate governance contribute to a company's operations?

    <p>By ensuring fair practices and transparency with stakeholders</p> Signup and view all the answers

    What distinguishes external auditors from internal auditors in their approach?

    <p>External auditors focus on assessing historical financial statements</p> Signup and view all the answers

    Which of the following is NOT typically a part of the external audit process?

    <p>Implementing changes in internal control systems</p> Signup and view all the answers

    What do external auditors typically discuss with management during an exit conference?

    <p>Deficiencies in internal controls</p> Signup and view all the answers

    What is the assurance provided by external auditors known as in the U.K.?

    <p>True and fair view</p> Signup and view all the answers

    What is one of the key differences between internal and external audits?

    <p>External audits are conducted independently of the company</p> Signup and view all the answers

    What is a common purpose of auditing services beyond financial statement audits?

    <p>Verifying compliance with regulations or laws</p> Signup and view all the answers

    What is the purpose of the International Professional Practices Framework (IPPF)?

    <p>To organize guidance for internal audit professionals.</p> Signup and view all the answers

    Which factor indicates that the audit function needs to adapt?

    <p>Changing technology and environment.</p> Signup and view all the answers

    What role can an internal auditor transform into when external auditors identify significant issues?

    <p>A consultancy role.</p> Signup and view all the answers

    What is one of the steps internal audit must take to enhance its function?

    <p>Align with the organization’s key business objectives.</p> Signup and view all the answers

    How can internal audit improve its effectiveness?

    <p>By streamlining audit processes.</p> Signup and view all the answers

    What document do external auditors provide to management after identifying issues?

    <p>Audit management letter.</p> Signup and view all the answers

    What primary benefit does external auditing provide to financial information?

    <p>It offers assurance and builds trust.</p> Signup and view all the answers

    Which of the following is NOT a goal for internal audit to become a strategic player?

    <p>Increase costs associated with audits.</p> Signup and view all the answers

    What is one of the functions of the Auditor General under Section 25(1)?

    <p>Determine compliance with prudent financial principles in public administration</p> Signup and view all the answers

    What must be presented alongside the annual Estimates of Revenue and Expenditure?

    <p>Fiscal Policy Paper detailing the macroeconomic framework</p> Signup and view all the answers

    How soon must the Auditor General report to the Houses of Parliament after the Fiscal Policy Paper is laid?

    <p>Within 2 weeks</p> Signup and view all the answers

    Which of the following is NOT a reason for the Auditor General to recommend a surcharge under the FAA Act?

    <p>Loss or destruction of personal property</p> Signup and view all the answers

    What does the Auditor General need to determine regarding public bodies in the specified public sector?

    <p>Whether they are commercial in nature and not to be included in the specified public sector</p> Signup and view all the answers

    What is a primary aim of reviewing the Fiscal Policy Paper?

    <p>To justify deviations from fiscal outcomes</p> Signup and view all the answers

    Under which section of the FAA Act can the Auditor General recommend a surcharge?

    <p>Section 20-24</p> Signup and view all the answers

    Which of the following is a function of the Auditor General regarding public expenditure?

    <p>Conduct audits to ensure legal compliance</p> Signup and view all the answers

    Study Notes

    Audit Practice and Procedures II - Week One

    • Audit Function: History, Importance, and Dynamics
    • Auditor General's Department: Established in 1829 as a part-time office, an independent office was established in 1851.
    • Current Auditor General: Pamela Monroe Ellis, FCCA, FCA, CISA, 2008 – Present (There were 12 previous Auditor Generals)
    • Duties and Responsibilities: Defined in the Jamaican Constitution and the Financial Administration and Audit Act. Responsible for assessing the effectiveness of financial management systems and compliance with policies/guidelines.
    • Section 25(1): Auditor General must determine if accounts are kept faithfully; rules and procedures are sufficient for assessment and allocation; all money used for designated purposes and avoid waste/extravagance; compliance with Government property procedures; and effectiveness of programs/services.
    • Additional Functions: Related to Government accounts; supervision and control of public funds; accounts of any government authority within Jamaica.
    • FAA Act: Requires the Minister of Finance to present a Fiscal Policy Paper (FPP) to Parliament with the annual Estimates of Revenue and Expenditure, with an accompanying report to Parliament from the Auditor General within 2 weeks. This report assesses the government's fiscal outcomes and conformance to prudent financial principles.

    Audit Functions

    • Definition of Auditing: Accumulation and evaluation of evidence to assess the correspondence of information with established criteria. Done by competent personnel. 
    • History and Utility of Auditing: Latin word audire meaning "to hear." A social phenomenon designed for its utility, specifically to reduce risk and improve performance for organizations/individuals who lack firsthand knowledge (or confidence in the accuracy or propriety) of the procedures or performance of the organization/individual in question.  
    • Internal Audit Functions: Internal auditors are employed by the organization and take a continuous view of organization efficiency. They ensure risk management practices, corporate governance, and fraud detection are optimal. Internal auditors focus on continuous improvement and support the organization's strategic goals.
    • External Audit Functions: External Auditors are independent firms hired to assess financial statements and compliance by examining a company's records (e.g., balance sheets, statements of procedures) looking backward to confirm accuracy, compliance with specified standards; and identifying and reporting related issues and suggested improvements). The scope of this work is determined by the organization. 
    • Internal vs. External Audit Comparative: Provides a table outlining the differences between internal and external audit functions in terms of purpose, relationship to the company, focus, audience, perspective, timing, and professional designation.

    Terminology

    • Accountability: The obligation of an individual or organization to account for activities, accept responsibility, and disclose results transparently.
    • Audit Evidence: Verifiable information related to audit criteria (e.g., GAAP, IFRS), including records, statements, and other data.
    • Corporate Governance: The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its stakeholders.
    • Auditor Independence: Refers to the independence of external auditors ensuring a neutral and unbiased assessment of financial information.
    • External Auditors: Inspect financial statements to express an opinion as to whether information is presented fairly in accordance with established standards (e.g., GAAP, IFRS). Auditors work for independent firms.
    • Internal Auditors: Employees of a company charged with delivering objective evaluations across the company's financial and operational business activities, including corporate governance.

    Understanding the Dynamics

    • Transformation: Internal audit needs to align itself with the organization's core objectives, which implies improvement in efficiency, and cost savings. Internal audits should also cover broader risks and actively anticipate future risks. Improving audit skills and leveraging external expertise is a key element of this process, too.
    • Three Key Steps: (1) Link internal audit to business value agenda; (2) Build business case for change; (3) Create plan focusing on value measurement and accountability.

    References (sources not included, but mentioned in presentation):

    • Various URLs related to the Jamaican Auditor General, the Institute of Internal Auditors (IIA), and other cited sources.

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    Week 1 - Lecture 1 - Audit Practice Procedures PDF

    Description

    This quiz covers the history, importance, and dynamics of the audit function, with a focus on the Auditor General's Department in Jamaica. Explore key duties, responsibilities, and the roles of past and present auditors. Test your knowledge on the legislative framework governing auditing in Jamaica.

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