Modern Auditing:

1
Modern Auditing Assurance Services and the
Integrity of Financial Reporting, 8th Edition
William C. Boynton California Polytechnic State
University at San Luis Obispo Raymond N.
Johnson Portland State University
Chapter 21 Internal, Operational, and
Governmental Auditing
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Chapter Overview
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Internal Auditing Defined

• Internal
• Independent and objective
• Systematic, disciplined approach
• Helps and organization accomplish its objectives

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Internal Auditing

• Evolution of Internal Auditing
• IIA Code of Ethics
• IIA Attribute and Performance Standards
• Attribute Standards
• Performance Standards
• Implementation Standards

5
Relationship with External Auditors
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Operational Auditing Defined

• Systematic process
• Evaluating an organizations operations
• Effectiveness, efficiency, and economy of
  operations
• Reporting to appropriate persons
• Recommendations for improvement

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Phases of an Operational Audit

• Select Auditee
• Plan Audit
• Perform Audit
• Report Findings
• Perform Followup

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Financial Statements v. Operational Audits
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Study Break

• This part of the internal auditing definition
  states the auditors judgment has value when it
  is free of bias.
• Internal
• Independent and objective
• Systematic, disciplined approach
• Helps an organization accomplish its objectives
• B. Independent and objective

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Study Break

• These IIA Attribute and Performance standards
  describe the nature of internal audit services
  and provide quality criteria against which the
  performance of these services can be measured.
• Attribute Standards
• Performance Standards
• Implementation Standards
• None of the above
• B. Performance Standards

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Study Break

• Which of the following is not a phase of the
  operational audit?
• Select auditee
• Perform audit
• Report findings to stockholders
• Perform followup
• C. Report findings to stockholders

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Types of Government Audits

• Financial Audits
• Attestation Engagements
• Performance Audits

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Generally Accepted Government Auditing Standards
(GAGAS)

• General Standards
• Independence
• Professional judgment
• Competence
• Quality Control and Assurance

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Generally Accepted Government Auditing Standards
(GAGAS)

• Fieldwork Standards for Financial Audits
• Auditor communication
• Considering the results of previous audit and
  attestation engagements
• Detecting material misstatements resulting from
  violations of contract provisions or grant
  agreements, or from abuse
• Developing elements of a finding
• Audit documentation

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Generally Accepted Government Auditing Standards
(GAGAS)

• Reporting Standards for Financial Audits
• Reporting auditors compliance with GAGAS
• Reporting on internal control and on compliance
  with laws, regulations, and provisions of
  contracts or grant agreements
• Reporting deficiencies in internal control,
  fraud, illegal acts, violations of provisions of
  contracts or grand agreements, and abuse

16
Generally Accepted Government Auditing Standards
(GAGAS)

• Reporting Standards for Financial Audits
• Reporting views of responsible officials
• Reporting privileged and confidential information
• Report issuance and distribution

17
Generally Accepted Government Auditing Standards
(GAGAS)

• Reporting on Compliance with Laws and Regulations
• Reporting on Internal Control

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The Single Audit Act

• Objectives of the Act
• Improve financial management
• Establish uniform requirements for audits
• Promote efficient and effective use of audit
  resources
• Ensure reliance and usage of audit work completed

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The Single Audit Act

• Applicability and Administration
• Federal Financial Assistance
• Major Programs
• Nonmajor Programs
• Cognizant Agency

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Scope of an Audit Under the Single Audit Act

• General
• Financial Statements
• Internal Controls
• Compliance
• Audit Followup
• Reporting Requirements
• Opinion on Financial Statements
• Report on Internal Control
• Report on Compliance
• Schedule of Findings and Questioned Costs

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Study Break

• This type of government audit concern examining,
  reviewing, or performing agreed-upon procedures
  on a subject matter or an assertion about a
  subject matter and reporting on the results.
• Financial audits
• Attestation engagements
• Performance audits
• Compliance audits
• B. Attestation engagements

22
Study Break

• Within the General Standards of GAGAS, this
  standard states that staff assigned to perform
  the audit or attestation should collectively
  possess adequate professional competence for the
  tasks required.
• Independence
• Professional judgment
• Competence
• Quality Control and Assurance
• C. Competence

23
Study Break

• This act established the concept of a single
  organizationwide government audit encompassing
  both financial and compliance audits.
• Securities Act of 1933
• Securities Act of 1934
• Single Audit Act
• None of the above
• C. Single Audit Act