LA 7 Flashcards
What are the 2 levels of organisational info
Strategic Level
-Where strategic plan is defines
-Vision and Mission statements developed
-Generation of strategic objectives
Operational Level
-Performance of orgaisational objectives
-Where day-2-day activities happen
Define Vision and Mission
V
-Statement of what org wants to become
M
-Defines the purpose of the org
SM in charge of determining V+M + strategic org objectives
What is an audit
An examination to verify the correctness of representations
What is an audit engagement
-An audit assignment related to a specific business unit/process
What are the 2 types of audit services and provide the audit engagements associated w/ them
Types = Advisory or Assurance
Engagements;
-Control adequacy and effectiveness engagement
-Compliance engagement
-Financial engagements
-Operational engagements
Explain the Control adequacy and effectiveness engagement
Assurance service
-Provides assurance on an org’s achievement of IC objectives
Purpose - to supply evidence on
-Adequacy and effectiveness of ICs
Responsibilities of..
-Managements = implementation
-IA = evaluate/assess adequacy and effectivness of ICs
Explain the Compliance audit engagement
Assurance service
-Provides assurance on an org’s compliance to laws, regulations, policies and procedures
Purpose - to supply evidence on
Compliance to laws, regulations, policies and procedures
Responsibilities of..
-Managements = implementation
-IA = evaluate/assess compliance to laws, regulations, policies and procedures
Explain the Financial audit engagement
Purpose
To express on opinion on the reasonableness of financial info
Responsibilities
-EA and IA
Management objectives
-Existence and Occurrence
-Completeness
-Cut-off
-Accuracy
-Valuation
Explain the Operational (performance) audit engagement
Purpose
-Add value to processes by identifying possible opportunities for benchmarking or best practices
Engagement objectives
-Economy (inputs)
>appropriate quantity and quality @ lowest cost
-Efficiency (conversion)
-Effectiveness (outputs)
What are the steps of planning an engagement (Stage1)
S1: Obtain an understanding of the engagement client
S2: Meet w/ engagement client
S3: Conduct Risk Assessment
S4: Identify engagement objectives
S5: Resource allocation
S6: Prepare engagement work program
S7: Final confirmation to proceed
Discuss Step 1 for planning an engagement
Step 1: Obtain an understanding of the engagement client
-Purpose to obtain an understanding of org’s activities and env it operates in
-Factors to consider
>Philosophy and culture w/in org
>Management style of top management
>Labour matter
Discuss Step 2 for planning an engagement
Step 2: Meet w/ engagement client
-Purpose and extent of engagement is discussed w/ client
Discuss Step 3 for planning an engagement
Step 3: Conduct Risk Assessment
-IA attempts to identify areas that require attention
-Guidelines for identifying risks
>Poor performance and high cost
>Irregularities/fraud have taken place
Discuss Step 4 for planning an engagement
Step 4: Identify engagement objectives
-The criteria
>These are the standards which and evaluation and/verification is made
>”What should be in place”
-The condition
>”What is currently in place”
Discuss Step 6 for planning an engagement
Step 6: Prepare engagement work program
-Also known as the audit programme
-A list of steps to be executed
What are the steps of performing and audit engagement (Stage 2)
S1: Identify engagement info
S2: Perform engagement procedures
S3: Analyze and evaluate engagement info
S4: Draft the findings
S5: Document engagement info
Discuss Step 1 of performing an engagement
Step 1: Identify engagement info
-Characteristics of engagement info
>Sufficient
>Relevant
>Reliable
-Types of evidence
>Physical
>Testimonial
>Analytical
-Sources of evidence
>Auditor (most reliable)
>3rd party
>Client (least reliable)
Discuss Step 4 of performing an engagement
Step 4: Draft he findings
-Criteria = What should be in place
-Condition = What is in place
-Cause = Reason for difference
-Effect = Risk
-Significance rating
-Recommendation = How management can address the root cause
Discuss Step 5 of performing an engagement
Step 5: Document engagement info
-Document all evidence on working papers
-Engagements must be supervised to ensure
>Objectives are achieved
>Quality is assured
>Staff is developed
