Section 6

Question 1

Classification and understandability

Answer 1

The presentation and disclosure assertions include assertions about classification and understandability. Financial information should be properly presented and disclosed, and disclosures should be clear (AU-C 315 and AS 1105). Thus, when restrictions have been placed on retained earnings, the auditor should determine that they are properly disclosed in the notes to the financial statements.

Eg restrictions have been imposed in loans

Question 2

Inquiry (engagement technique)

Answer 2

By interviewing selected individuals about the causes of inefficiencies, the internal auditor can expect to obtain input as to the existence and seriousness of personality conflicts that inhibit efficient and effective work.

Eg personality conflicts affecting productivity

Question 3

Scanning (engagement procedure)

Answer 3

Good for inventory - notates unusual relationships such as old items with no activity

Question 4

Confirmation (engagement procedure)

Answer 4

Obtain evidence as a direct written response to the auditor from a third party. Verifies amounts of it physical existence of an item.

Also eg Inventory value - not good for this