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T h i s i s a s a m p l e c h a p t e r Auditing and Assurance Services, 15e (Arens) Chapter 26 Internal and Governmental Financial Auditing and Operational Auditing #ear(i(- Ob.ecti/e 2011 12 I(ter(al A+3itors are e45ecte3 to a33 /al+e to the or-a(i6atio( thro+-h im5ro/e3 o5eratio(al e77ecti/e(ess. I( a33itio(" their res5o(sibilities i(cl+3e all the 7ollo8i(- except' A2 re/ie8i(- the reliabilit9 a(3 i(te-rit9 o7 i(7ormatio(. B2 e(s+ri(- com5lia(ce 8ith the com5a(9:s acco+(ti(- 5olicies. C2 /eri79i(- acco+(ti(- i(7ormatio( 7or e4ter(al +sers. &2 e(s+ri(- com5lia(ce 8ith a55licable -o/er(me(tal re-+latio(s. A(s8er' C Terms' I(ter(al a+3itors res5o(sibilities &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 22 Stateme(ts o( I(ter(al A+3iti(- Sta(3ar3s are iss+e3 b9 the' A2 AICPA. B2 SEC. C2 I(ter(al A+3iti(- Sta(3ar3s Boar3s. &2 A+3iti(- Sta(3ar3s Boar3s. A(s8er' C Terms' Stateme(ts o( I(ter(al A+3iti(- Sta(3ar3s &i77' Eas9 Ob.ecti/e' #O 2011 1
AACSB' Re7lecti/e thi()i(- s)ills ,2 I(ter(al a+3itors are res5o(sible to' A2 the boar3 o7 3irectors. B2 ma(a-eme(t. C2 both A a(3 B. &2 (either A (or B. A(s8er' C Terms' I(ter(al a+3itors are res5o(sible to &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 2
42 ;hich o7 the 7ollo8i(- is not a similarit9 bet8ee( e4ter(al a(3 i(ter(al a+3itors< A2 Both m+st be i(3e5e(3e(t o7 the com5a(9. B2 Both m+st be com5ete(t. C2 Both 7ollo8 a similar metho3olo-9 i( 5er7ormi(- their a+3its. &2 Both co(si3er ris) a(3 materialit9 3eci3i(- the e4te(t o7 their tests a(3 e/al+ati(- res+lts. A(s8er' A Terms' Similarit9 bet8ee( i(ter(al a(3 e4ter(al a+3itors &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills =2 E4ter(al a+3itors 8o+l3 co(si3er i(ter(al a+3itors e77ecti/e i7 the9 are' A2 i(3e5e(3e(t o7 the o5erati(- +(its bei(- e/al+ate3. B2 com5ete(t a(3 8ell trai(e3. C2 ha/e 5er7orme3 rele/a(t a+3it tests o7 the i(ter(al co(trols a(3 7i(a(cial stateme(ts. &2 all o7 the abo/e. A(s8er' & Terms' E4ter(al a+3itors> I(ter(al a+3itors e77ecti/e &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 02 ;hich o7 the 7ollo8i(- is most correct re-ar3i(- e4ter(al a+3itors +se o7 i(ter(al a+3itors 3irectl9 o( the a+3it e(-a-eme(t< A2 &isco+ra-e B2 Prohibit C2 E(co+ra-e &2 Permit A(s8er' & Terms' E4ter(al a+3itors +se o7 i(ter(al a+3itors &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills ?2 The i(ter(atio(al sta(3ar3s 7or the 5ro7essio(al 5ractice o7 i(ter(al a+3iti(- i(cl+3e 8hich t8o cate-ories o7 sta(3ar3s< A2 Attrib+te a(3 5er7orma(ce B2 Com5ete(c9 a(3 5ro7essio(al s)e5ticism C2 Per7orma(ce a(3 i(te-rit9 &2 Ethics a(3 r+les o7 co(3+ct A(s8er' A Terms' I(ter(atio(al sta(3ar3s> I(ter(al a+3iti(- &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills ,
102 The I(ter(atio(al Sta(3ar3s 7or the Pro7essio(al Practice o7 A+3iti(- list ? 5er7orma(ce sta(3ar3s. #ist three. A(s8er' %a(a-i(- the I(ter(al A+3it Acti/it9 at+re o7 the 8or) E(-a-eme(t Pla((i(- Per7ormi(- the E(-a-eme(t Comm+(icati(- Res+lts %o(itori(- Pro-ress Comm+(icati(- the Acce5ta(ce o7 Ris)s Terms' I(ter(atio(al Sta(3ar3s 7or the Pro7essio(al Practice> Per7orma(ce sta(3ar3s &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 112 ;hat are three similarities bet8ee( i(ter(al a(3 e4ter(al a+3itors< A(s8er' C Both m+st be com5ete(t as a+3itors a(3 remai( ob.ecti/e i( 5er7ormi(- their 8or) a(3 re5orti(- their res+lts. C Both 7ollo8 a similar metho3olo-9 i( 5er7ormi(- their a+3its" i(cl+3i(- 5la((i(- a(3 5er7ormi(- tests o7 co(trols a(3 s+bsta(ti/e tests. C Both co(si3er ris) a(3 materialit9 i( 3eci3i(- the e4te(t o7 their tests a(3 e/al+ati(- res+lts. Ho8e/er" their 3ecisio(s abo+t materialit9 a(3 ris)s ma9 3i77er" beca+se e4ter(al +sers ma9 ha/e 3i77ere(t (ee3s tha( ma(a-eme(t or the boar3. Terms' Similarities bet8ee( i(ter(al a(3 e4ter(al a+3itors &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 122 E4ter(al a+3itors t95icall9 co(si3er i(ter(al a+3itors e77ecti/e i7 the9 meet three criteria. ;hat are these criteria< A(s8er' E4ter(al a+3itors t95icall9 co(si3er i(ter(al a+3itors e77ecti/e i7 the9 are' C I(3e5e(3e(t o7 the o5erati(- +(its bei(- e/al+ate3 C Com5ete(t a(3 8ell trai(e3 C Ha/e 5er7orme3 rele/a(t a+3it tests o7 the i(ter(al co(trols a(3 7i(a(cial stateme(ts Terms' I(ter(al a+3itors e77ecti/e i7 the9 meet three criteria &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills =
1,2 The I(stit+te o7 I(ter(al A+3itors has establishe3 Ethical Pri(ci5les 7or its members. #ist each o7 the 5ri(ci5les. A(s8er' The IIA:s ethical 5ri(ci5les are' C I(te-rit9 C Ob.ecti/it9 C Co(7i3e(tialit9 C Com5ete(c9 Terms' I(stit+te o7 I(ter(al A+3itors establishe3 Ethical Pri(ci5les &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 142 I(3e5e(3e(ce is a 7+(3ame(tal ethical 5ri(ci5le 7or i(ter(al a+3itors. A2 Tr+e B2 False A(s8er' B Terms' I(3e5e(3e(ce> Ethical 5ri(ci5le &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 1=2 C+rre(t 5ro7essio(al a+3iti(- sta(3ar3s 5rohibit e4ter(al a+3itors 7rom +si(- i(ter(al a+3itors 7or 3irect assista(ce o( e4ter(al a+3its. A2 Tr+e B2 False A(s8er' B Terms' C+rre(t 5ro7essio(al a+3iti(- sta(3ar3s &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 102 I(ter(al a+3itors are e45ecte3 to 5ro/i3e /al+e to the or-a(i6atio( thro+-h im5ro/e3 o5eratio(al e77ecti/e(ess. A2 Tr+e B2 False A(s8er' A Terms' I(ter(al a+3itors res5o(sibilities &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 0
1?2 The ob.ecti/es o7 i(ter(al a+3itors are co(si3erabl9 broa3er tha( the ob.ecti/es o7 e4ter(al a+3itors. A2 Tr+e B2 False A(s8er' A Terms' Ob.ecti/es o7 i(ter(al a+3itors &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 1@2 I(te-rit9 is o(e o7 the IIA:s ethical 5ri(ci5les. A2 Tr+e B2 False A(s8er' A Terms' I(te-rit9> IIA ethical 5ri(ci5les &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 1A2 I(ter(al a+3iti(- sta(3ar3s are i(cl+3e3 i( the Bl+e Boo). A2 Tr+e B2 False A(s8er' B Terms' I(ter(al a+3iti(- sta(3ar3s &i77' Eas9 Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 202 Pro7essio(al -+i3eli(es 7or 5er7ormi(- i(ter(al a+3its 7or com5a(ies are (ot as 8ell13e7i(e3 as 7or e4ter(al a+3its. A2 Tr+e B2 False A(s8er' A Terms' Pro7essio(al -+i3eli(es 7or i(ter(al a+3its &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills 212 The I(ter(al A+3iti(- Sta(3ar3s Boar3 iss+es Statements on Internal Auditing Standards. A2 Tr+e B2 False A(s8er' A Terms' I(ter(al A+3iti(- Sta(3ar3s Boar3> Stateme(ts o( I(ter(al A+3iti(- Sta(3ar3s &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills ?
222 Beca+se the9 s5e(3 all their time 8ithi( o(e com5a(9" i(ter(al a+3itors ha/e m+ch -reater )(o8le3-e abo+t the com5a(9:s o5eratio(s a(3 i(ter(al co(trols the( e4ter(al a+3itors A2 Tr+e B2 False A(s8er' A Terms' I(ter(al a+3itors &i77' %o3erate Ob.ecti/e' #O 2011 AACSB' Re7lecti/e thi()i(- s)ills #ear(i(- Ob.ecti/e 2012 12 The 5rimar9 so+rce o7 a+thoritati/e literat+re 7or 3oi(- -o/er(me(t a+3its is the' A2 P+r5le Boo). B2 Bello8 Boo). C2 Dree( Boo). &2 Re3 Boo). A(s8er' B Terms' A+thoritati/e literat+re 7or 3oi(- -o/er(me(t a+3its &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 22 ;he( a state or local -o/er(me(t a-e(c9 recei/es 7e3eral 7+(3s" it is s+b.ect to the a+3it reE+ireme(ts o7' A2 Bello8 Boo) Si(-le A+3it Act O%B Circ+lar A11,, Bes Bes o B2 Bello8 Boo) Si(-le A+3it Act O%B Circ+lar A11,, o o Bes C2 Bello8 Boo) Si(-le A+3it Act O%B Circ+lar A11,, Bes Bes Bes &2 Bello8 Boo) Si(-le A+3it Act O%B Circ+lar A11,, Bes o o A(s8er' C Terms' #ocal -o/er(me(t a-e(c9 recei/es 7e3eral 7+(3s> A+3it reE+ireme(ts &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills @
,2 ;hich o7 the 7ollo8i(- is most correct 8ith re-ar3 to the com5ariso( o7 the 7i(a(cial a+3iti(- sta(3ar3s o7 the Bello8 Boo) 8ith the 5ri(ci5les o7 the AICPA a+3iti(- sta(3ar3s< A2 The same as B2 F+ite 3i77ere(t 7rom C2 I(com5atible 8ith &2 Co(siste(t 8ith A(s8er' & Terms' Fi(a(cial a+3iti(- sta(3ar3s o7 Bello8 Boo)> De(eral A+3iti(- Sta(3ar3s &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 42 The correct title o7 the Bello8 Boo) is' A2 Do/er(me(t A+3iti(- Sta(3ar3s. B2 IIA Practice Sta(3ar3s. C2 Stateme(t o7 Res5o(sibilities o7 I(ter(al A+3iti(-. &2 Stateme(t o7 Sta(3ar3s o( Acco+(ti(- a(3 Re/ie8 Ser/ices. A(s8er' A Terms' Bello8 Boo) &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills =2 Do/er(me(tal A+3iti(- Sta(3ar3s reco-(i6e that beca+se o7 5+blic acco+(tabilit9 o/er -o/er(me(tal acti/ities the acce5table tolerable misstateme(t as com5are3 to commercial b+si(esses ma9 be' A2 eE+al. B2 lo8er. C2 hi-her. &2 i(3etermi(able. A(s8er' B Terms' Do/er(me(tal A+3iti(- Sta(3ar3s> Tolerable misstateme(t &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 02 The Si(-le A+3it Act reE+ires that a( a+3it be co(3+cte3 7or reci5ie(ts 8ho recei/e total 7e3eral 7+(3s i( a(9 7iscal 9ear o7' A2 *1"000"000 or more. B2 *=00"000 or more. C2 *,00"000 or more. &2 *100"000 or more. A(s8er' B Terms' Si(-le A+3it Act &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills A
?2 A( a+3it 3esi-(e3 to 5ro/i3e reaso(able ass+ra(ce o7 3etecti(- material misstateme(ts res+lti(- 7rom (o(com5lia(ce 8ith 5ro/isio(s o7 co(tracts or -ra(t a-reeme(ts that ha/e a material a(3 3irect e77ect o( the 7i(a(cial stateme(ts 8o+l3 be calle3 aG(2' A2 5er7orma(ce a+3it. B2 ma(a-eme(t a+3it. C2 o5eratio(al a+3it. &2 com5lia(ce a+3it. A(s8er' & Terms' %aterial misstateme(ts 7rom (o(com5lia(ce 8ith 5ro/isio(s o7 co(tracts or -ra(t a-reeme(ts &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills @2 A+3itors i(/ol/e3 i( 5la((i(-" 5er7ormi(-" or re5orti(- o( a+3its +(3er DADAS m+st com5lete HHHHHHHH ho+rs o7 co(ti(+i(- 5ro7essio(al e3+catio( i( each t8o19ear 5erio3. A2 20 B2 40 C2 00 &2 @0 A(s8er' & Terms' A+3itors i(/ol/e3 i( 5la((i(-" 5er7ormi(-" or re5orti(- o( a+3its +(3er DADAS &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills A2 A( a+3it co(3+cte3 i( accor3a(ce 8ith the Bello8 Boo) m+st i(cl+3e a( a+3it re5ort that states the a+3it 8as 5er7orme3 i( accor3a(ce 8ith' A2 DAAS. B2 DADAS. C2 DASA. &2 SAS. A(s8er' B Terms' Bello8 Boo)> A+3it re5ort> A+3it 5er7orme3 i( accor3a(ce 8ith &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 102 Ho8 3o the ris) a(3 materialit9 threshol3s cha(-e i( a -o/er(me(t a+3it com5are3 to a 7i(a(cial stateme(t a+3it o7 a 5+blic com5a(9< A(s8er' The Bello8 Boo) reco-(i6es that i( -o/er(me(t a+3its the threshol3s o7 acce5table a+3it ris) a(3 materialit9 ma9 be lo8er tha( i( a( a+3it o7 a commercial e(ter5rise. This is beca+se o7 the se(siti/it9 o7 -o/er(me(t acti/ities a(3 their 5+blic acco+(tabilit9. Terms' Ris) a(3 materialit9 threshol3s cha(-e i( a -o/er(me(t a+3it &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 10
112 I( a33itio( to a( o5i(io( o( 8hether the 7i(a(cial stateme(ts are i( accor3a(ce 8ith DAAP" i3e(ti79 7o+r other re5orts reE+ire3 b9 the O%B Circ+lar A11,,. A(s8er' The 7ollo8i(- re5orts are reE+ire3' C A( o5i(io( as to 8hether the sche3+le o7 7e3eral a8ar3s is 5rese(te3 7airl9 i( all material res5ects i( relatio( to the 7i(a(cial stateme(ts as a 8hole. C A re5ort o( i(ter(al co(trol relate3 to the 7i(a(cial stateme(ts a(3 ma.or 5ro-rams. C A re5ort o( com5lia(ce 8ith la8s" re-+latio(s" a(3 the 5ro/isio(s o7 co(tracts or -ra(t a-reeme(ts" 8here (o(com5lia(ce co+l3 ha/e a material e77ect o( the 7i(a(cial stateme(ts. This re5ort ca( be combi(e3 8ith the re5ort o( i(ter(al co(trol. C A sche3+le o7 7i(3i(-s a(3 E+estio(e3 costs. Terms' Re5orts reE+ire3 b9 O%B Circ+lar A11,, &i77' Challe(-i(- Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 122 The a+3iti(- sta(3ar3s o7 the Bello8 Boo) are co(siste(t 8ith the te( -e(erall9 acce5te3 a+3iti(- sta(3ar3s o7 the AICPA. There are" ho8e/er" im5orta(t a33itio(sImo3i7icatio(s i( the Bello8 Boo). For e4am5le" the Bello8 Boo) reco-(i6es that materialit9 a(3 ris) are lo8er 3+e to the (at+re o7 the -o/er(me(t e(ter5rise. &isc+ss the other a33itio(sImo3i7icatio(s. A(s8er' C Quality control. A+3itors o7 -o/er(me(t e(tities m+st ha/e a( a55ro5riate s9stem o7 i(ter(al E+alit9 co(trol a(3 5artici5ate i( a( e4ter(al E+alit9 co(trol re/ie8 5ro-ram. C Compliance auditing. The a+3it sho+l3 be 3esi-(e3 to 5ro/i3e reaso(able ass+ra(ce o7 3etecti(- material misstateme(ts res+lti(- 7rom (o(com5lia(ce 8ith 5ro/isio(s o7 co(tracts or -ra(t a-reeme(ts that ha/e a material a(3 3irect e77ect o( the 7i(a(cial stateme(ts. C Reporting. The a+3it re5ort m+st state that the a+3it 8as ma3e i( accor3a(ce 8ith -e(erall9 acce5te3 -o/er(me(t a+3iti(- sta(3ar3s GDADAS2. The re5ort o( 7i(a(cial stateme(ts m+st 3escribe the sco5e o7 the a+3itors: testi(- o7 com5lia(ce 8ith la8s a(3 re-+latio(s a(3 i(ter(al co(trols a(3 5rese(t the res+lts o7 those tests" or re7er to a se5arate re5ort co(tai(i(- that i(7ormatio(. Terms' A+3iti(- sta(3ar3s o7 Bello8 Boo)> A33itio(s a(3 mo3i7icatio(s to a+3iti(- sta(3ar3s o7 the AICPA &i77' Challe(-i(- Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 1,2 Do/er(me(t a+3iti(- sta(3ar3s are i(cl+3e3 i( the Bello8 Boo). A2 Tr+e B2 False A(s8er' A Terms' Do/er(me(t a+3iti(- sta(3ar3s> Bello8 Boo) &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 11
142 The 7ormal (ame o7 the Bello8 Boo) is Government Auditing Standards. A2 Tr+e B2 False A(s8er' A Terms' Bello8 Boo)> Do/er(me(t A+3iti(- Sta(3ar3s &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 1=2 The JRe3 Boo)J s5eci7ies all a+3iti(- sta(3ar3s iss+e3 b9 the $.S. De(eral Acco+(ti(- O77ice. A2 Tr+e B2 False A(s8er' B Terms' $.S. De(eral Acco+(ti(- O77ice &i77' %o3erate Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills 102 E4te(si/e 5ro7essio(al 3e/elo5me(t is (ecessar9 7or a+3itors 3oi(- -o/er(me(tal a+3its. A2 Tr+e B2 False A(s8er' A Terms' Do/er(me(t a+3iti(- &i77' Eas9 Ob.ecti/e' #O 2012 AACSB' Re7lecti/e thi()i(- s)ills #ear(i(- Ob.ecti/e 201, 12 ;hich o(e o7 the 7ollo8i(- is not a ma.or 3i77ere(ce bet8ee( o5eratio(al a(3 7i(a(cial a+3iti(-< A2 P+r5ose o7 the a+3it B2 &istrib+tio( o7 the re5ort C2 Testi(- the e77ecti/e(ess o7 i(ter(al co(trols &2 I(cl+sio( o7 (o(7i(a(cial areas A(s8er' C Terms' O5eratio(al a(3 7i(a(cial a+3iti(- &i77' Eas9 Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills 12
22 ;hich o7 the 7ollo8i(- is not o(e o7 the ma.or 3i77ere(ces bet8ee( 7i(a(cial a(3 o5eratio(al a+3iti(-< A2 The 7i(a(cial a+3it is orie(te3 to the 5ast" b+t a( o5eratio(al a+3it co(cer(s 5er7orma(ce 7or the 7+t+re. B2 The 7i(a(cial a+3it re5ort has 8i3es5rea3 3istrib+tio(" b+t the o5eratio(al a+3it re5ort has limite3 3istrib+tio(. C2 Fi(a(cial a+3its 3eal 8ith the i(7ormatio( o( the 7i(a(cial stateme(ts" b+t o5eratio(al a+3its are co(cer(e3 8ith the i(7ormatio( i( the le3-ers. &2 Fi(a(cial a+3its are limite3 to matters that 3irectl9 a77ect the 7air(ess o7 the 7i(a(cial stateme(t 5rese(tatio(" b+t o5eratio(al a+3its co/er a(9 as5ect o7 e77icie(c9 a(3 e77ecti/e(ess. A(s8er' C Terms' &i77ere(ce bet8ee( 7i(a(cial a(3 o5eratio(al a+3iti(- &i77' %o3erate Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills ,2 ;hich o7 the 7ollo8i(- is not a 3i77ere(ce bet8ee( o5eratio(al a+3iti(- a(3 7i(a(cial a+3iti(-< A2 Both m+st be 5er7orme3 b9 a CPA. B2 O5eratio(al a+3it re5orts are +s+all9 o7 a restricte3 3istrib+tio( 8hile 7i(a(cial a+3it re5orts are 8i3el9 3istrib+te3. C2 O5eratio(al a+3its o7te( co/er (o(17i(a(cial iss+es 8hile 7i(a(cial a+3its 3o (ot. &2 o(e o7 the abo/e is a 3i77ere(ce. A(s8er' A Terms' &i77ere(ce bet8ee( o5eratio(al a+3iti(- a(3 7i(a(cial a+3iti(- &i77' %o3erate Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills 42 A t95ical ob.ecti/e o7 a( o5eratio(al a+3it is to 3etermi(e 8hether a( e(tit9:s' A2 i(ter(al co(trol is a3eE+atel9 o5erati(- as 3esi-(e3. B2 7i(a(cial stateme(ts 5rese(t 7airl9 the res+lts o7 o5eratio(s. C2 s5eci7ic o5erati(- +(its are 7+(ctio(i(- e77icie(tl9 a(3 e77ecti/el9. &2 o5eratio(al i(7ormatio( is i( accor3a(ce 8ith -e(erall9 acce5te3 -o/er(me(t a+3iti(- sta(3ar3s. A(s8er' C Terms' Ob.ecti/e o7 o5eratio(al a+3it &i77' %o3erate Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills 1,
=2 &isc+ss three ma.or 3i77ere(ces bet8ee( o5eratio(al a(3 7i(a(cial a+3iti(-. A(s8er' C Purpose of the audit. Fi(a(cial a+3iti(- em5hasi6es 8hether historical i(7ormatio( 8as correctl9 recor3e3" 8hereas o5eratio(al a+3iti(- em5hasi6es e77ecti/e(ess a(3 e77icie(c9. C Distribution of the reports. For 7i(a(cial a+3iti(-" the re5ort t95icall9 -oes to ma(9 e4ter(al +sers o7 7i(a(cial stateme(ts" s+ch as stoc)hol3ers a(3 ba()ers" 8hereas o5eratio(al a+3it re5orts are i(te(3e3 5rimaril9 7or ma(a-eme(t. C Inclusion of nonfinancial areas in operational auditing. O5eratio(al a+3its co/er a(9 as5ect o7 e77icie(c9 a(3 e77ecti/e(ess i( a( or-a(i6atio(" 8hereas 7i(a(cial a+3its are limite3 to matters that 3irectl9 a77ect the 7air(ess o7 7i(a(cial stateme(t 5rese(tatio(s. Terms' &i77ere(ces bet8ee( o5eratio(al a(3 7i(a(cial a+3its &i77' %o3erate Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills 02 O5eratio(al a+3its are 5rimaril9 -eare3 to8ar3s im5ro/i(- a com5a(9:s o5eratio(al e77icie(c9 a(3 e77ecti/e(ess. A2 Tr+e B2 False A(s8er' A Terms' O5eratio(al a+3its> E77icie(c9 a(3 e77ecti/e(ess &i77' Eas9 Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills ?2 For 7i(a(cial a+3iti(-" the a+3it re5ort t95icall9 -oes to ma(9 +sers o7 7i(a(cial stateme(ts" 8hereas o5eratio(al a+3it re5orts are i(te(3e3 5rimaril9 7or ma(a-eme(t. A2 Tr+e B2 False A(s8er' A Terms' Fi(a(cial a+3it re5orts> O5eratio(al a+3it re5orts &i77' Eas9 Ob.ecti/e' #O 201, AACSB' Re7lecti/e thi()i(- s)ills #ear(i(- Ob.ecti/e 2014 12 ;hich o7 the 7ollo8i(- -ro+5s co+l3 be i(/ol/e3 i( a( o5eratio(al a+3it< A2 CPA 7irms B2 I(ter(al a+3itors C2 Do/er(me(t a+3itors &2 All o7 the abo/e co+l3 be i(/ol/e3. A(s8er' & Terms' O5eratio(al a+3its &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 14
22 ;hich o7 the 7ollo8i(- stateme(ts re-ar3i(- t95es o7 o5eratio(al a+3its is li)el9 i(correct< A2 A 7+(ctio(al a+3it has the a3/a(ta-e o7 5ermitti(- s5eciali6atio( b9 a+3itors. B2 A( a3/a(ta-e o7 7+(ctio(al a+3iti(- is its abilit9 to e/al+ate i(terrelate3 7+(ctio(s. C2 The em5hasis i( a( or-a(i6atio(al a+3it is o( ho8 e77icie(tl9 a(3 e77ecti/el9 7+(ctio(s i(teract. &2 S5ecial o5eratio(al a+3iti(- assi-(me(ts arise at the reE+est o7 ma(a-eme(t. A(s8er' B Terms' O5eratio(al a+3its &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills ,2 The t8o most im5orta(t E+alities 7or a( o5eratio(al a+3itor are' A2 5erso(alit9 a(3 a55eara(ce. B2 i(3e5e(3e(ce a(3 com5ete(ce. C2 com5ete(ce a(3 tech(ical trai(i(-. &2 aca3emic bac)-ro+(3 a(3 s+77icie(t e45erie(ce. A(s8er' B Terms' F+alities 7or a( o5eratio(al a+3itor &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 42 ;hich o7 the 7ollo8i(- ca( a77ect the i(3e5e(3e(ce o7 o5eratio(al a+3itors< A2 Res5o(sibilities Re5orti(- Str+ct+re Bes o B2 Res5o(sibilities Re5orti(- Str+ct+re o o C2 Res5o(sibilities Re5orti(- Str+ct+re o Bes &2 Res5o(sibilities Re5orti(- Str+ct+re Bes Bes A(s8er' & Terms' A77ect i(3e5e(3e(ce o7 o5eratio(al a+3itors &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1=
=2 E77ecti/e i(ter(al co(trols are 3esi-(e3 to hel5 or-a(i6atio(s achie/e 8hich o7 the 7ollo8i(- ob.ecti/es< A2 Reliabilit9 o7 7i(a(cial re5orti(- B2 E77icie(c9 a(3 e77ecti/e(ess o7 o5eratio(s C2 Com5lia(ce 8ith a55licable la8s a(3 re-+latio(s &2 All o7 the abo/e A(s8er' & Terms' I(ter(al co(trol ob.ecti/es &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 02 ;hich o7 the 7ollo8i(- best 3escribes a( a+3it that em5hasi6es ho8 e77icie(tl9 a(3 e77ecti/el9 7+(ctio(s i(teract< A2 O5eratio(al B2 Com5lia(ce C2 Fi(a(cial &2 Or-a(i6atio(al A(s8er' & Terms' A+3it that em5hasi6es ho8 e77icie(tl9 a(3 e77ecti/el9 7+(ctio(s i(teract &i77' Challe(-i(- Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills ?2 ;hich o7 the 7ollo8i(- is not a 5+r5ose o7 a 5ro-ram a+3it as 5er7orme3 b9 -o/er(me(t a+3itors< A2 &etermi(atio( o7 the e4te(t to 8hich the 3esire3 res+lts establishe3 b9 the le-islat+re are bei(- achie/e3 B2 &etermi(atio( o7 the ca+ses o7 i(e77icie(cies i( s5o(sore3 5ro-rams C2 &etermi(atio( o7 the e77ecti/e(ess o7 or-a(i6atio(s" 5ro-rams a(3 acti/ities &2 &etermi(atio( as to 8hether the e(tit9 has com5lie3 8ith la8s a(3 re-+latio(s a55licable to the 5ro-ram A(s8er' B Terms' P+r5ose o7 5ro-ram a+3it 5er7orme3 b9 -o/er(me(t a+3itors &i77' Challe(-i(- Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 10
@2 ;hat 3isti(-+ishes i(ter(al co(trol e/al+atio( a(3 testi(- 7or 7i(a(cial a(3 o5eratio(al a+3iti(-< A2 P+r5ose o7 the 8or) B2 Sco5e o7 the 8or) C2 Both A a(3 B &2 either A (or B A(s8er' C Terms' I(ter(al co(trol e/al+atio( a(3 testi(- 7or 7i(a(cial a(3 o5eratio(al a+3iti(- &i77' Challe(-i(- Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills A2 HHHHHHHH is the 3e-ree to 8hich the or-a(i6atio(:s ob.ecti/es are accom5lishe3. A2 E77ecti/e(ess B2 E77icie(c9 C2 Doal o5timi6atio( &2 Per7orma(ce A(s8er' A Terms' O5eratio(al a+3it> Acti/ities as re5rese(te3 b9 7+(ctio(s &i77' Challe(-i(- Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 102 #ist the three 5+r5oses o7 a 5ro-ram a+3it. A(s8er' 1. The e4te(t to 8hich the 3esire3 res+lts or be(e7its establishe3 b9 the le-islat+re or other a+thori6i(- bo39 are achie/e3 2. The e77ecti/e(ess o7 or-a(i6atio(s" 5ro-rams" acti/ities" or 7+(ctio(s ,. ;hether the e(tit9 has com5lie3 8ith la8s a(3 re-+latio( a55licable to the 5ro-ram Terms' Bello8 Boo)> &e7i(es a(3 sets sta(3ar3s 7or 5er7orma(ce a+3its &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 112 &isc+ss each o7 the three broa3 cate-ories Gt95es2 o7 o5eratio(al a+3its. A(s8er' C unctional. A 7+(ctio(al a+3it 3eals 8ith a+3iti(- o(e or more 7+(ctio(s Ge.-." 5+rchasi(-2 i( a( or-a(i6atio(. C !rgani"ational. A( or-a(i6atio(al a+3it 3eals 8ith a( e(tire or-a(i6atio(al +(it" s+ch as a 3e5artme(t" bra(ch" or s+bsi3iar9. It em5hasi6es ho8 e77icie(tl9 a(3 e77ecti/el9 7+(ctio(s i(teract. C Special assignments. S5ecial assi-(me(t a+3its arise at the reE+est o7 ma(a-eme(t 8he( there is a (ee3 to i(/esti-ate a 5artic+lar area" s+ch as i(/esti-ati(- the 5ossibilit9 o7 7ra+3 i( a 3i/isio(" or 3etermi(i(- the ca+se o7 a( i(e77ecti/e IT s9stem. Terms' Cate-ories o7 o5eratio(al a+3its &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1?
122 O5eratio(al a+3iti(- is the re/ie8 o7 a( or-a(i6atio( 7or e77icie(c9 a(3 e77ecti/e(ess. &isc+ss 8hat is mea(t b9 the terms Je77ecti/e(essJ a(3 Je77icie(c9.J A(s8er' C E77ecti/e(ess re7ers to the 3e-ree to 8hich the or-a(i6atio(:s ob.ecti/es a(3 -oals are accom5lishe3. C E77icie(c9 re7ers to the 3e-ree to 8hich costs are re3+ce3 8itho+t re3+ci(- e77ecti/e(ess. Terms' O5eratio(al a+3iti(-> E77ecti/e(ess a(3 e77icie(c9 &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1@
1,2 %atch se/e( o7 the terms Ga1o2 8ith the 3escri5tio(sI3e7i(itio(s 5ro/i3e3 belo8 G11?2' a. Com5lia(ce a+3it b. Eco(om9 a(3 e77icie(c9 a+3it c. E77ecti/e(ess 3. E77icie(c9 e. F+(ctio(al a+3it 7. Do/er(me(t A+3iti(- Sta(3ar3s -. Do/er(me(t a+3it h. I(stit+te o7 I(ter(al A+3itors i. O5eratio(al a+3iti(- .. Or-a(i6atio(al a+3it ). Pro-ram a+3it l. Si(-le A+3it Act m. S5ecial assi-(me(t (. IIA Practice Sta(3ar3s o. Stateme(ts o( I(ter(al A+3iti(- Sta(3ar3s HHHHHHHH 1. The o77icial title o7 the Bello8 Boo). HHHHHHHH 2. A ma(a-eme(t reE+est 7or a( o5eratio(al a+3it 7or a s5eci7ic 5+r5ose" s+ch as i(/esti-ati(- the 5ossibilit9 o7 7ra+3 i( a 3i/isio( or ma)i(- recomme(3atio(s 7or re3+ci(- the cost o7 a ma(+7act+re3 5ro3+ct. HHHHHHHH ,. A -o/er(me(t a+3it to 3etermi(e 8hether a( e(tit9 is acE+iri(-" 5rotecti(-" a(3 +si(- its reso+rces eco(omicall9 a(3 e77icie(tl9 a(3 8hether the e(tit9 has com5lie3 8ith la8s a(3 re-+latio(s co(cer(i(- s+ch matters. HHHHHHHH 4. The 3e-ree to 8hich the or-a(i6atio(:s ob.ecti/es are accom5lishe3. HHHHHHHH =. The re/ie8 o7 a( or-a(i6atio( 7or e77icie(c9 a(3 e77ecti/e(ess. HHHHHHHH 0. Fe3eral le-islatio( that 5ro/i3es 7or a si(-le coor3i(ate3 a+3it to satis79 the a+3it reE+ireme(ts o7 all 7e3eral 7+(3i(- a-e(cies. HHHHHHHH ?. Stateme(ts iss+e3 b9 the I(ter(al A+3iti(- Sta(3ar3s Boar3 o7 the IIA to 5ro/i3e a+thoritati/e i(ter5retatio( o7 the IIA Practice Sta(3ar3s. 1A
A(s8er' 1. 7 2. m ,. b 4. c =. I 0. l ?. o Terms' T95es o7 a+3its> Sta(3ar3s &i77' %o3erate Ob.ecti/e' #O 2011" #O 2012" #O 201," a(3 #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 142 E77ecti/e(ess re7ers to the 3e-ree to 8hich costs are re3+ce3 8itho+t re3+ci(- e77icie(c9. A2 Tr+e B2 False A(s8er' B Terms' E77ecti/e(ess> Costs re3+ce3 8itho+t re3+ci(- e77icie(c9 &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1=2 E77icie(c9 re7ers to the 3e-ree to 8hich costs are re3+ce3 8itho+t cha(-i(- e77ecti/e(ess. A2 Tr+e B2 False A(s8er' A Terms' E77icie(c9> Costs are re3+ce3 8itho+t re3+ci(- e77ecti/e(ess. &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 102 E77ecti/e(ess is co(cer(e3 8ith 8hether 3e7i(e3 -oals are achie/e3" 8hereas e77icie(c9 is co(cer(e3 8ith 8hether the -oals are achie/e3 8ith a mi(im+m +se o7 reso+rces. A2 Tr+e B2 False A(s8er' A Terms' E77ecti/e(ess a(3 e77icie(c9 &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 20
1?2 O5eratio(al a+3its ma9 be 5er7orme3 b9 i(ter(al a+3itors a(3 -o/er(me(t a+3itors" b+t (ot b9 e4ter(al a+3itors. A2 Tr+e B2 False A(s8er' B Terms' O5eratio(al a+3its> I(ter(al a+3itors> Do/er(me(t a+3itors &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1@2 The t8o most im5orta(t E+alities 7or a( o5eratio(al a+3itor to 5ossess are i(3e5e(3e(ce a(3 com5ete(ce. A2 Tr+e B2 False A(s8er' A Terms' I(ter(al a+3itors> I(3e5e(3e(ce a(3 com5ete(ce &i77' Eas9 Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 1A2 A+3itors ca( i(sist that the cha(-es that the9 recomme(3 as the res+lt o7 a( o5eratio(al a+3it be im5leme(te3 b9 the com5a(9. A2 Tr+e B2 False A(s8er' B Terms' O5eratio(al a+3its &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 202 O5eratio(al a+3its are o7te( cate-ori6e3 as 7+(ctio(al" or-a(i6atio(al" or s5ecial assi-(me(ts. A2 Tr+e B2 False A(s8er' A Terms' O5eratio(al a+3its> F+(ctio(al" or-a(i6atio(al or s5ecial assi-(me(ts &i77' %o3erate Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 212 O(e 3isa3/a(ta-e o7 7+(ctio(al a+3iti(- is the 7ail+re to e/al+ate i(terrelate3 7+(ctio(s. A2 Tr+e B2 False A(s8er' A Terms' F+(ctio(al a+3iti(- &i77' Challe(-i(- Ob.ecti/e' #O 2014 AACSB' Re7lecti/e thi()i(- s)ills 21
#ear(i(- Ob.ecti/e 201= 12 ;hich o7 the 7ollo8i(- is not o(e o7 the three 5hases i( a( o5eratio(al a+3it< A2 Pla((i(- B2 Trai(i(- a(3 s+5er/isi(- em5lo9ees C2 E/i3e(ce acc+m+latio( a(3 e/al+atio( &2 Re5orti(- a(3 7ollo81+5 A(s8er' B Terms' Phase3 o7 o5eratio(al a+3it &i77' Eas9 Ob.ecti/e' #O 201= AACSB' Re7lecti/e thi()i(- s)ills 22 ;he( 5er7ormi(- a( o5eratio(al a+3it" the i(ter(al a+3it team m+st 7irst 3etermi(e that' A2 a 7i(a(cial a+3it has bee( 5er7orme3 b9 a( i(3e5e(3e(t a+3itor. B2 a 7i(a(cial a+3it has bee( 5er7orme3 b9 a( i(ter(al a+3itor. C2 a re/ie8 8as 5er7orme3 b9 either a( i(3e5e(3e(t or a( i(ter(al a+3itor. &2 s5eci7ic criteria are 3e/elo5e3 to 3e7i(e e77ecti/e(ess. A(s8er' & Terms' O5eratio(al a+3its &i77' %o3erate Ob.ecti/e' #O 201= AACSB' Re7lecti/e thi()i(- s)ills 22
,2 As com5are3 to a 7i(a(cial a+3it" a( o5eratio(al a+3it' A2 ReE+ires the a+3itors to s5e(3 more time 8ith the i(tereste3 5arties %a)es sta77i(- more com5licate3 Bes Bes B2 ReE+ires the a+3itors to s5e(3 more time 8ith the i(tereste3 5arties %a)es sta77i(- more com5licate3 o o C2 ReE+ires the a+3itors to s5e(3 more time 8ith the i(tereste3 5arties %a)es sta77i(- more com5licate3 Bes o &2 ReE+ires the a+3itors to s5e(3 more time 8ith the i(tereste3 5arties %a)es sta77i(- more com5licate3 o Bes A(s8er' A Terms' O5eratio(al com5are3 to 7i(a(cial a+3it &i77' %o3erate Ob.ecti/e' #O 201= AACSB' Re7lecti/e thi()i(- s)ills 42 &isc+ss each o7 the three 5hases o7 a( o5eratio(al a+3it. A(s8er' C Planning. I( the 5la((i(- 5hase" the a+3itor m+st 3etermi(e the sco5e o7 the e(-a-eme(t" sta77 the e(-a-eme(t 5ro5erl9" obtai( bac)-ro+(3 i(7ormatio( abo+t the or-a(i6atio(al +(it" +(3ersta(3 i(ter(al co(trol" a(3 3eci3e o( the a55ro5riate e/i3e(ce to acc+m+late. C #vidence accumulation and evaluation. I( o5eratio(al a+3iti(-" it is commo( to +se 3oc+me(tatio(" clie(t i(E+ir9" a(3 obser/atio( e4te(si/el9" 8hile co(7irmatio( a(3 re5er7orma(ce are +se3 less e4te(si/el9 7or most o5eratio(al a+3its tha( 7or 7i(a(cial a+3its. C Reporting and follo$%up. The a+3it re5ort is tailore3 to a33ress the sco5e o7 the a+3it" 7i(3i(-s" a(3 recomme(3atio(s a(3 is t95icall9 se(t o(l9 to ma(a-eme(t. ;he( recomme(3atio(s are ma3e to ma(a-eme(t" 7ollo81+5 is 3o(e to 3etermi(e 8hether the recomme(3e3 cha(-es 8ere ma3e" a(3 i7 (ot" 8h9. Terms' Phases o7 o5eratio(al a+3it &i77' %o3erate Ob.ecti/e' #O 201= AACSB' Re7lecti/e thi()i(- s)ills 2,