Chapter 7 Audit tools and techniques

Question 1

10 Different Techniques used in an internal audit engagement

Answer 1

1- Walk through tests
2-Interviews and enquiries
3-Internal control questionnaires
4-System descriptions
5-Flow chart techniques
6-Control matrices
7-Analytical procedures
8-Computer audit techniques
9-Sampling
10-Working Papers

Question 2

Walk-through test

Answer 2

Physical walk through of a process or action, following all of the steps from beginning to end. This gives the Internal Auditor an indication of the flow of documents and actions as well as any control activities already in place. Should be performed SUBTLY

Used during planning stage

Question 3

Interviews and enquiries

Answer 3

Interviews and enquiries are used throughout the audit engagement to gain information and evidence.
Interview = more formal, usually part of planning
Enquiry = less formal, oral or in writing

*enquiry is usally used as a secondary source of evidence for audit engagement

Used during planning and performing stage

Question 4

Internal Control Questionaire

Answer 4

Considered by some Internal Auditors as the most important document in the performance of a compliance audit engagement.

The questionnaire is the link between understanding the system and processes and performing the audit engagement procedures related to control activities

yes answer = indicate existence of a good internal control (can be subject to further testing)
no answer = indicate absence of a good internal control (no further testing can be done on an absent control)

Used during planning to gain understanding of internal control and perfoming to gather evidence

Question 5

Flow chart techniques

Answer 5

Flow chart = visual display of internal control activities

Two types of charts
1- Overview flow chart (summarised the flow)
2- Detailed flow chart (shows all aspects)

Consider the following when constructing a flow chart

• Standard set of symbols used
• Explain all symbols
• Do not over complicate/cram flow chart
• Intricate transactions should rather be explained separate
• Emphasise cycles rather than accounts

Question 6

System Descriptions

Answer 6

Often combined with flow charts to give a clear description on the business and processes. Always written

Remember:

• be concise and factual
• avoid lengthy descriptions
• refer to tasks not people (cashier rather than Mrs Smith)
• List of names of people on leave during engagement etc

Question 7

Control Matrices

Answer 7

In complicated systems matrices are used in conjunction with a system description. Matrices are also used in computerised systems

• Tasks are indicated on horisontal axis
• Function performed on the vertical axis

*helps with segregation of duties, you can identify who does what

Question 8

Analytical controls

Answer 8

Analytical procedures are done by studying and comparing relationships between information in different periods (compare 2006 information with 2007 information etc)

*vergelyk basies syfers en kyk vir enige vreemde of eenmalige betalings, stygings ens

Question 9

Computer Audit Techniques

Answer 9

Three main categories fall in this technique:

1- Audit around the computer
2-Audit with the computer
3-Audit through the computer

Question 10

Audit around the computer

Answer 10

Old School. You only use the computer to print out documents which you then manually audit

Question 11

Audit with the computer

Answer 11

Use the computer in conjunction with auditing software to select certain criteria for printouts if you have a very large data pool e.g: You have 10 000 debtors on file and only want those owing more than R5000

Question 12

Audit through the computer

Answer 12

You audit the computer processes. You test the control processes installed in the computer and run imaginary scenarios. You then match the actual results with the expected results

Question 13

Sampling

Answer 13

Random selection from a pool of transactions by the auditor. These selections are based on both statistical and non-statistical sampling.

Question 14

Working Papers

Answer 14

Working papers are proof that the auditors completed their tasks.

Working papers should always be stored safely.

Working papers can also be used in future as a source of information for engagements.

Question 15

Types of working papers

Answer 15

1-Current, annual or carry forward working paper files
(all the relevant information on the specific engagement performed during the year)

2-Permanent or perpetual working paper files
(like a history file of all of the relevant procedures, engagements, processes etc of the engagement client. This will be a source for the internal auditor when planning engagement)