Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8 th Edition

1. Modern Auditing: Assurance Services and the Integrity of Financial Reporting, 8th Edition William C. Boynton California Polytechnic State University at San Luis Obispo Raymond N. Johnson Portland State University Chapter 21 – Internal, Operational, and Governmental Auditing

2. Chapter Overview

3. Internal Auditing Defined • Internal • Independent and objective • Systematic, disciplined approach • Helps and organization accomplish its objectives

4. Internal Auditing • Evolution of Internal Auditing • IIA Code of Ethics • IIA Attribute and Performance Standards • Attribute Standards • Performance Standards • Implementation Standards

5. Relationship with External Auditors

6. Operational Auditing Defined • Systematic process • Evaluating an organization’s operations • Effectiveness, efficiency, and economy of operations • Reporting to appropriate persons • Recommendations for improvement

7. Phases of an Operational Audit • Select Auditee • Plan Audit • Perform Audit • Report Findings • Perform Followup

8. Financial Statements v. Operational Audits

9. Study Break • This part of the internal auditing definition states the auditor’s judgment has value when it is free of bias. • Internal • Independent and objective • Systematic, disciplined approach • Helps an organization accomplish its objectives B. Independent and objective

10. Study Break • These IIA Attribute and Performance standards describe the nature of internal audit services and provide quality criteria against which the performance of these services can be measured. • Attribute Standards • Performance Standards • Implementation Standards • None of the above B. Performance Standards

11. Study Break • Which of the following is not a phase of the operational audit? • Select auditee • Perform audit • Report findings to stockholders • Perform followup C. Report findings to stockholders

12. Types of Government Audits • Financial Audits • Attestation Engagements • Performance Audits

13. Generally Accepted Government Auditing Standards (GAGAS) • General Standards • Independence • Professional judgment • Competence • Quality Control and Assurance

14. Generally Accepted Government Auditing Standards (GAGAS) • Fieldwork Standards for Financial Audits • Auditor communication • Considering the results of previous audit and attestation engagements • Detecting material misstatements resulting from violations of contract provisions or grant agreements, or from abuse • Developing elements of a finding • Audit documentation

15. Generally Accepted Government Auditing Standards (GAGAS) • Reporting Standards for Financial Audits • Reporting auditors’ compliance with GAGAS • Reporting on internal control and on compliance with laws, regulations, and provisions of contracts or grant agreements • Reporting deficiencies in internal control, fraud, illegal acts, violations of provisions of contracts or grand agreements, and abuse

16. Generally Accepted Government Auditing Standards (GAGAS) • Reporting Standards for Financial Audits • Reporting views of responsible officials • Reporting privileged and confidential information • Report issuance and distribution

17. Generally Accepted Government Auditing Standards (GAGAS) • Reporting on Compliance with Laws and Regulations • Reporting on Internal Control

18. The Single Audit Act • Objectives of the Act • Improve financial management • Establish uniform requirements for audits • Promote efficient and effective use of audit resources • Ensure reliance and usage of audit work completed

19. The Single Audit Act • Applicability and Administration • Federal Financial Assistance • Major Programs • Nonmajor Programs • Cognizant Agency

20. Scope of an Audit Under the Single Audit Act • General • Financial Statements • Internal Controls • Compliance • Audit Followup • Reporting Requirements • Opinion on Financial Statements • Report on Internal Control • Report on Compliance • Schedule of Findings and Questioned Costs

21. Study Break • This type of government audit concern examining, reviewing, or performing agreed-upon procedures on a subject matter or an assertion about a subject matter and reporting on the results. • Financial audits • Attestation engagements • Performance audits • Compliance audits B. Attestation engagements

22. Study Break • Within the General Standards of GAGAS, this standard states that staff assigned to perform the audit or attestation should collectively possess adequate professional competence for the tasks required. • Independence • Professional judgment • Competence • Quality Control and Assurance C. Competence

23. Study Break • This act established the concept of a single organizationwide government audit encompassing both financial and compliance audits. • Securities Act of 1933 • Securities Act of 1934 • Single Audit Act • None of the above C. Single Audit Act