3: Financial, Environmental, and Consulting Engagements Flashcards
Management implicitly or explicitly makes assertions about the _____[1]_____, _____[2]_____, and _____[3]_____ of information in financial statements.
1.Measurement
2.Presentation
3.Disclosure
What are the key risks affecting the reliability and integrity of financial information?
Understating liabilities
Overstating assets
Overstating revenues
Understating expenses
Applying unreasonable accounting estimates
Applying accounting principles that are no longer in effect
List common accounting cycles.
Sales, Receivables, and Cash Receipts Cycle
Purchases, Payables, and Cash Disbursements Cycle
Production or Conversion Cycle
Financial Capital and Payment Cycle
Personnel and Payroll Cycle
External Financial Reporting Cycle
Define fraudulent financial reporting.
Intentional misstatements or omissions to deceive users, such as altering accounting records or documents, misrepresenting or omitting significant information, and misapplying accounting principles.
Define misappropriation of assets.
Any theft, embezzlement, or other wrongful appropriation of organizational assets.
Define environmental management system.
An organization’s structure of responsibilities and policies, practices, procedures, processes, and resources for protecting the environment and managing environmental issues.
What are the seven types of environmental audits according to The IIA Research Foundation?
1.Compliance audits
2.Environmental management systems audits
3.Transactional audits
4.Treatment, storage, and disposal facility audits
5.Pollution prevention audits
6.Environmental liability accrual audits
7.Product audits
The risks presented by environmental, health, and safety issues include
Consequences of noncompliance with government regulations
External reputational harm
Internal reputational harm
Concerns by employees as a result of actual and potential issues leading to low morale and attrition is representative of
Internal reputational harm.
Define consulting services.
Consulting services are advisory and related client service activities that are agreed upon with the client. They are intended to add value and improve an organization’s governance, risk management, and control processes without the internal auditor assuming management responsibility.
The nature of consulting services must be defined in __________.
The internal audit charter.
List types of consulting services.
Formal
Informal
Special
Emergency
Advisory
Educational
Facilitative
What is the proper action if impairments to the internal auditor’s independence or objectivity develop during the consulting engagement?
Immediate disclosure to management.
If internal auditors have potential impairments to _____[1]_____ or _____[2]_____ relating to proposed consulting services, _____[3]_____ must be made to the engagement client _____[4]_____ to accepting the engagement.
Independence
Objectivity
Disclosure
Prior
Independence and objectivity may be impaired if assurance services are provided within _________ after a formal consulting engagement.
1 year.
Internal auditors must exercise due professional care during a consulting engagement by considering the
Needs and expectations of clients, including the nature, timing, and communication of engagement results;
Relative complexity and extent of work needed to achieve the engagement’s objectives; and
Cost of the consulting engagement in relation to potential benefits.
Can an internal auditor provide consulting services relating to operations for which he or she had previous responsibilities?
Yes.
Define benchmarking.
A continuous evaluation of the practices of the best organizations in their class and the adaptation of processes to reflect the best of these practices.
List the types of benchmarking.
Competitive
Process (function)
Strategic
Internal
Generic
Performance
What does benchmarking enable?
Comparison of processes, operations, or products.
Define due diligence auditing.
A service in which internal auditors and others (external auditors, tax experts, finance professionals, attorneys, etc.) determine the business justification for a major transaction (business combination, joint venture, divestiture, etc.) and whether that justification is valid.
The ethical culture of an organization is linked to the ____[1]____ and is the most important ____[2]____ control.
1.Governance process
2.Soft
What does reengineering involve?
Process innovation and core process redesign. Instead of improving existing procedures, it finds new ways of doing things.
