Audit Practice and Procedures II - Week 1
45 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

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 (B)</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 (B)</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 (B)</p> Signup and view all the answers

What role does auditing play in organizational accountability?

<p>It enables the reinforcement of accountability and control (B)</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. (C)</p> Signup and view all the answers

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

<p>1851 (A)</p> Signup and view all the answers

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

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

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

<p>Twelve (B)</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 (B)</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 (D)</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 (D)</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 (B)</p> Signup and view all the answers

Which statement best describes auditor independence?

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

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

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

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

<p>Deficiencies in internal controls (C)</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 (D)</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 (C)</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 (C)</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. (D)</p> Signup and view all the answers

Which factor indicates that the audit function needs to adapt?

<p>Changing technology and environment. (C)</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. (A)</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. (B)</p> Signup and view all the answers

How can internal audit improve its effectiveness?

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

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

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

What primary benefit does external auditing provide to financial information?

<p>It offers assurance and builds trust. (A)</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. (B)</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 (B)</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 (A)</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 (D)</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 (B)</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 (B)</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 (B)</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 (D)</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 (A)</p> Signup and view all the answers

Flashcards

Auditor General's Department Establishment

Established in 1829 as a part-time office, evolved to an independent office in 1851 under Jamaican law.

Auditor General's Duties

Assesses financial management system effectiveness, compliance with policies, and proper handling of all government funds. Ensures funds are used as intended and that waste/extravagance is avoided.

Account Keeping

The Auditor General verifies the accuracy and proper management of government accounts.

Revenue and Receipts

The Auditor General ensures revenue collection procedures and allocation are effective, and financial rules and procedures are applied correctly.

Signup and view all the flashcards

Expenditure Compliance

The Auditor General verifies that all government spending aligns with parliamentary provisions and avoids waste.

Signup and view all the flashcards

Government Property Control

The Auditor General ensures adequate procedures are in place to safeguard government property.

Signup and view all the flashcards

Public Money Administration

The Auditor General verifies that all acts and rules relating to public funds and property have been followed.

Signup and view all the flashcards

Program Effectiveness Measurement

The Auditor General evaluates the efficacy of government programs and services to ensure tax money is used effectively.

Signup and view all the flashcards

Auditor General's Role

The Auditor General examines government accounts, public authorities' accounts, and public funds management, following legislation.

Signup and view all the flashcards

Fiscal Policy Paper (FPP)

A document presented to Parliament by the Finance Minister outlining macroeconomic frameworks, fiscal responsibility, and management strategies.

Signup and view all the flashcards

Auditor General's FPP Examination

The Auditor General reviews the Fiscal Policy Paper (FPP) to check for accuracy, compliance with prudent financial principles, and correct inclusion of public sector entities.

Signup and view all the flashcards

Deviations Justification

The Auditor General assesses the Ministry of Finance's explanations for any differences between fiscal targets and actual outcomes.

Signup and view all the flashcards

Surcharge Recommendation

The Auditor General can recommend a surcharge against government officials for failing to collect owed funds, improper payments, or loss of public monies.

Signup and view all the flashcards

Improper Payment

Payment of public funds without proper authorization or documentation.

Signup and view all the flashcards

Public Funds

Money belonging to and used by the government or public entities.

Signup and view all the flashcards

Financial Principles

Set of rules and guidelines for managing funds to avoid errors or fraud.

Signup and view all the flashcards

What is auditing?

Auditing is the process of gathering and evaluating evidence about financial information to determine if it is accurate and follows established rules. It's like a detective investigating financial records.

Signup and view all the flashcards

What is the purpose of an audit?

Audits help ensure that financial information is reliable and trustworthy. They are used to prevent fraud, mismanagement, and to maintain financial accountability.

Signup and view all the flashcards

What is the 'audit function'?

The audit function refers to the overall process of conducting an audit. It involves various stages, from planning to reporting, and aims to provide objective insights into financial performance.

Signup and view all the flashcards

What are the benefits of an internal audit?

Internal audits are conducted by employees within an organization to assess financial controls and risks. They can help improve efficiency, identify potential problems, and ensure compliance with rules.

Signup and view all the flashcards

What is an external audit?

External audits are conducted by independent firms hired by a company to review its financial records. This provides an objective assessment of financial health and reliability.

Signup and view all the flashcards

What are the key objectives of audits?

Audits aim to provide objective insights, improve operational efficiency, assess risks and protect assets, evaluate organizational controls, and ensure compliance with legal requirements.

Signup and view all the flashcards

What's the difference between internal and external auditors?

Internal auditors work within the company, while external auditors are independent firms hired to perform audits. External auditors offer an objective and unbiased view.

Signup and view all the flashcards

External Audit Purpose

External audit ensures that a company's financial statements accurately and fairly reflect its financial performance and position.

Signup and view all the flashcards

External Audit Audience

External audit reports are designed to provide assurance to investors, lenders, and other stakeholders about the company's financial health.

Signup and view all the flashcards

External Audit Standards

External audits need to adhere to specific accounting standards like GAAP in the US or 'true and fair view' in the UK.

Signup and view all the flashcards

External Audit Scope

The scope of an external audit is determined by its purpose, which includes verifying financial statements and compliance with rules.

Signup and view all the flashcards

External Audit Timing

External auditors typically do most of their work at the end of the year, reviewing past financial records to confirm accuracy.

Signup and view all the flashcards

External Audit Report

After the audit, external auditors provide a report (audit management letter) to management and stakeholders, outlining findings and recommendations.

Signup and view all the flashcards

External Auditor Independence

External auditors must be independent of the companies they audit to avoid bias in their assessment.

Signup and view all the flashcards

External Audit vs. Internal Audit

External audits are conducted by independent auditors to provide assurance to external stakeholders, while internal audits are done by the company's own staff to improve internal control and processes.

Signup and view all the flashcards

Internal Audit's Role

Internal audit ensures the accuracy of a company's financial statements and evaluates its internal controls to prevent material misstatements.

Signup and view all the flashcards

IPPF (International Professional Practices Framework)

A set of guidelines for internal auditors, developed by the Institute of Internal Auditors (IIA), to ensure a consistent and ethical approach to auditing.

Signup and view all the flashcards

Internal Audit's Dynamic Nature

Internal audit evolves constantly to adapt to changes in technology, regulations, and business needs.

Signup and view all the flashcards

Internal Audit's Consultancy Role

Internal auditors can act as consultants by identifying potential issues and recommending improvements to the organization's processes and controls.

Signup and view all the flashcards

Audit Management Letter

A letter from external auditors to company management outlining issues identified during an audit and recommending corrective actions.

Signup and view all the flashcards

Internal Audit's Transformation

Internal audit aims to become a strategic business partner by aligning with company objectives, improving efficiency, covering broader risks, and optimizing cost.

Signup and view all the flashcards

Internal Audit's Key Steps for Enhancement

Internal audit can improve its value and impact by aligning with business objectives, boosting efficiency, and being proactive about risks.

Signup and view all the flashcards

Internal Audit's Skills

Internal audit needs to identify and employ the right internal and external skills to meet the ever-changing needs of the organization.

Signup and view all the flashcards

External Auditors

Independent professionals who examine a company's financial records to ensure they are accurate and follow accounting standards like GAAP or IFRS.

Signup and view all the flashcards

Internal Auditors

Employees of a company who review its financial and operational activities to ensure efficiency, effectiveness, and compliance with company policies.

Signup and view all the flashcards

Auditor Independence

External auditors must be unbiased and free from any conflicts of interest that could influence their opinions on a company's financial statements.

Signup and view all the flashcards

Accountability

Being responsible for one's actions, including explaining and justifying them to stakeholders.

Signup and view all the flashcards

Audit Evidence

Documents, records, and other verifiable information that support the auditor's conclusions about a company's financial statements.

Signup and view all the flashcards

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.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

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.

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser