lOMoARcPSD|7371537 AUI4861 2020 TL 202 - Assignment answers Advanced Internal Audit practice (University of South Africa) StuDocu is not sponsored or endorsed by any college or university Downloaded by farai mokina (faraimokina@gmail.com) lOMoARcPSD|7371537 AUI4861/202/0/2020 Tutorial Letter 202/0/2020 INTERNAL AUDIT PRACTICE AUI4861 Year course Department of Auditing IMPORTANT INFORMATION This tutorial letter contains important information about your module. Downloaded by farai mokina (faraimokina@gmail.com) lOMoARcPSD|7371537 AUI4861/202/2020 KEY TO ASSIGNMENT 02/2020 1.1 Option 4 is correct. The IIA Standards state that the nature, timing and extent of followup should be determined by the chief audit executive. Options 1 and 2 are incorrect. The IIA Standards state that follow-up work is not management’s responsibility. Option 3 is incorrect. The auditor has to provide an opinion as to the decision made with regard to lack of action. 1.2 Option 2 is correct. According to the IIA’s Standards, “the CAE of the internal auditing department should be responsible to an individual in the organization with sufficient authority to promote independence.” External auditors are not individuals in the organisation. Option 1 is incorrect. The internal audit department will not have direct access to the board of directors. The access is indirect, via the chief operations officer (COO). According to the Standards, the “chief audit executive (CAE) should have direct communication with the board.” Option 3 is incorrect. Whether the COO has experience with internal auditors or not does not affect the audit department’s independence. Option 4 is incorrect. Although desirable, the Certified Internal Auditor (CIA) designation is not mandatory for a person to become an internal auditor. A CIA would, of course, insist on internal audit department independence. 1.3 Option 4 is correct. Responsibility for follow-up should be defined in the internal auditing department’s written charter. Option 1 is incorrect. Follow-up is not specified in the content of the audit committee’s mission statement. Option 2 is incorrect. This memo may contain a statement about responsibility for follow-up, but such a statement should be based on the wording and authority of the departmental charter. Option 3 is incorrect. Follow-up authority and responsibility may be cited in applicable audit reports, but the definition should be first contained in the departmental charter. 1.4 Option 3 is correct. The IIA Standards require follow-up action. Options 1 and 4 are incorrect. Follow-up is required. Option 2 is incorrect. Follow-up is to see that actions are taken, not just that the auditor’s recommendations have been implemented. Lack of resources is not a sufficient reason. 1.5 Option 3 is correct. IIA Standard 1320 states “The chief audit executive must communicate the results of the quality assurance and improvement program to senior management and the board”. This is the correct answer based on the IIA Standards. Option 1 is incorrect. As per the IIA Standards, this is the chief audit executive’s responsibility. Option 2 is incorrect. A quality assurance and improvement program is designed to enable an evaluation of the internal audit activity’s conformance with the Definition of Internal Auditing and the Standards and an evaluation of whether internal auditors apply the Code of Ethics. Option 4 is incorrect. It also includes training, employee performance evaluations, time and expense control, and similar administrative areas. 2 Downloaded by farai mokina (faraimokina@gmail.com) lOMoARcPSD|7371537 AUI4861/202/2020 1.6 Option 3 is correct. This is not an objective of the quality assurance review. Options 1, 2 and 4 as these are objectives under the IIA Standards. 1.7 Option 3 is correct. The true cause of a finding may require additional expertise and may be determinable only through additional management study. Option 1 is incorrect. If the finding is significant enough to report, time must be found to determine what action would solve the deficiency. Option 2 is incorrect. Avoiding honest differences of opinion is not an acceptable reason for deleting a recommendation. Option 4 is incorrect. Recommendations do not impair an auditor’s independence. Management is responsible for decision making and implementing suggestions or formulating new solutions. 1.8 Option 3 is correct. An understanding of management principles is required of all internal auditors. Option 1 is incorrect. Such skills should be included within the staff, but not required for each auditor. Option 2 is incorrect. Detailed knowledge of accounting is required only for those auditors who work extensively with financial records and reports. Option 4 is incorrect. An appreciation of computerised information systems is required, but this is less expertise than is needed for proficiency. 1.9 Option 3 is correct. The mix of audit skills in an audit staff affects the range of activities that can be audited. Auditing departments that comprise only people trained in accounting probably would be better able to examine financial and accounting systems than engineering systems, for example. As a result, departments should strive for an appropriate balance of experience, training, and ability in order to audit a range of activities within their respective organizations. Option 1 is incorrect. Auditing departments that hired only CIAs or CAs and individuals possessing accounting degrees would be better equipped to audit certain operations, for example, financial and accounting systems, than others that did not have these minimum standards. Option 2 is incorrect. A charter which set minimum professional standards, that is, CIA or CA, for its department’s auditors would promote professionalism. Option 4 is incorrect. The impact of this requirement would not affect whether consultants were used. Standard states that when auditors do not possess adequate knowledge and skills in certain required area consultants should be used. 1.10 Option 2 is correct. The IIA Standards address this aspect of working paper content. Options 1, 3 and 4 are incorrect as they do not address working papers. 1.11 Option 1 is correct. The IIA Standards states that auditors must continually develop their skills and knowledge. Option 2 is incorrect. Diversified tasks enhance an auditor’s experience by allowing him to become familiar with various components of the audit. Option 3 is incorrect. Internal auditors must be aware of current events in the field. Independent study is one means of accomplishing this. Option 4 is incorrect. Rotating supervisors is desirable because it helps to broaden on-the-job training. 1.12 Option 1 is correct. The internal auditor discusses conclusions and recommendations at appropriate levels of management before issuing a final engagement communication. 3 Downloaded by farai mokina (faraimokina@gmail.com) lOMoARcPSD|7371537 AUI4861/202/2020 Discussion with the engagement client not only provides a quality control review but is also a courtesy that enhances the internal audit–client relationship. Option 2 is incorrect. An interim engagement communication would have been used to obtain immediate action on a recommendation. Option 3 is incorrect. The distribution of communication is not a secondary purpose of an exit meeting. Option 4 is incorrect. Ordinarily, senior management should be given a summary of results. 1.13 Option 3 is correct. The audit manager dramatically changed the nature of the audit function without consulting with the audit committee, management, or the audit department charter. A second violation is the omission of negative findings. Option 1 and 4 are incorrect. Highlighting potential cost savings is appropriate for an audit report. Option 2 is incorrect. Item II is also a violation. 1.14 Option 3 is correct. The company secretarial function is not part of the oversight responsibilities of the audit committee. 1.15 Option 3 is correct. Lapsed time since the last audit is a factor affecting audit scheduling, not staffing. Options 1,2 and 4 are factors to consider in a staffing decision. 1.16 Option 1 is correct. since audit programs are not included in developing the audit work schedule and this occurs during the planning phase of an individual audit. 1.17 Option 2 is correct. Option 2 is correct. The skills of the internal audit staff do not affect the risk associated with potential audit clients. Options 1, 3 and 4 are factors that should be considered in a risk analysis. 1.18 Option 2 is correct. The CAE must ensure resources are appropriate, sufficient and effectively deployed to achieve the approved plan (Standards 2030). Option 1 is incorrect since the decision to outsource is not primarily based on existing resources. Option 3 is incorrect as the amount of resources is not a factor in establishing credibility. Option 4 is incorrect as succession planning is not related to the amount of audit resources. 1.19 Option 1 is correct. The internal audit department would, in composite, have the requisite skills to perform the audit. The other key element is that the staff auditor is carefully supervised such that significant deviations from good business practices would be noted. Option 2 is incorrect. The audit would not be conducted in accordance with the Standards because the staff auditor might not have noted significant deviations to include in the audit report. The review by the director at the time the report is generated would be too late. Option 3 is incorrect. Response 2 would not meet the Standards. Option 4 is incorrect. Response 1 would be consistent with the Standards. 4 Downloaded by farai mokina (faraimokina@gmail.com) lOMoARcPSD|7371537 AUI4861/202/2020 1.20 Option 4 is correct as that states the role of internal auditing as per the Definition of Infernal Auditing “Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes”. 1.21 Option 3 is correct. Option 3 is correct since the length of the CAE’s tenure should not be codified in the charter; it is a matter of ongoing judgment for the board. 1.22 Option 3 is correct. If the internal auditors lack the necessary expertise, external service providers should be employed who can provide the required knowledge, skills and other competencies. Option 1 is incorrect. The audit is within the scope of the internal audit activity. Option 2 is incorrect. Performing the audit using the current staff is inappropriate. Option 4 is incorrect. Accepting the contractor’s representation without adequate testing is inappropriate. 1.23 Option 4 is correct. External assessments must be conducted at least once every five years by a qualified, independent reviewer from outside the organisation (IIA Standards 1312). Options 1,2 and 3 are incorrect since these can be achieved by conducting internal assessments. 1.24 Option 3 is correct. The chief audit executive must communicate the results of the QAIP to senior management and the board (IIA Standards 1320. 1.25 Option 1 is correct. Internal auditors must possess the knowledge, skills and other competencies needed to perform their individual responsibilities. The internal audit activity collectively must possess or obtain the knowledge, skills and other competencies needed to perform its responsibilities (IIA Standards 1210). Therefore, option 1 is correct since not all applicants need to have an accounting degree. ---©--UNISA 2020 5 Downloaded by farai mokina (faraimokina@gmail.com)