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1 CH 6 - Internal Audit Process - Teaching Material Week 10 2022 LATEST
1 CH 6 - Internal Audit Process - Teaching Material Week 10 2022 LATEST
Class sessions
(April 2022)
A. The Auditor.
B.The Directors of the company.
C.The Audit Committee.
D.Internal Audit.
Q2. Residual risk is the risk that auditor not detecting a misstatement
during the audit engagement. Is this statement TRUE or False?
A. True
B.False
Test your knowledge
Q3. Which one of the following risk concepts can be assumed to have no
mitigating controls?
A. Business risk
B. Residual risk
C. Inherent risk
D. Current risk
Q4. Which of the following describes control risk when the auditor undertakes
an assignment:
A. The risk of a misstatement due to a failure of controls.
B. The risk that the auditor fails to detect a misstatement in the financial
statements.
A. True
B. False
Q6. If the banking process should be carried out with one member of staff
counting the cash and another banking it, What is this control called?
A. Authorisation.
B. Segregation of Duties.
C. Dereliction of duty.
Test your knowledge cont…
A. Control activities.
B. Risk assessments.
C. Control environments.
D. Monitoring.
a. Bank reconciliation.
b. Trial balance.
c. Authorisation
d. Insurance
Test your knowledge cont…
Q9. The following are examples of preventative control, except
a. Segregation of duties.
b. Pre-numbering.
c. Fire extinguisher
d. None of the above
A. True A. Authorisation.
B. False B. Segregation of Duties.
Answer: A C. Dereliction of duty.
Answer: B
A. Control activities.
B. Risk assessments.
C. Control environments.
D. monitoring.
Answer: C
Test your knowledge cont…
(Approved & defined by the Institute of Internal Auditors (IIA) in June 1999)
Answer: …………………………………………………………………………………………..
Self - Test (Your knowledge)
(Approved & defined by the Institute of Internal Auditors (IIA) in June 1999)
Answer:
Picture 1
Picture 2
QUESTION: Is it acceptable?
What is an audit?
• Audit
─ Action
─ Self–Reading: ‘Example of buying a mobile phone’
• Criteria
• Condition
• Finding
• Organisational level
─ Strategic
─ Business unit
─ Business process
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Audit Methodology
Organisational objectives
E. g, To
increase profits
generated from Risk
selling goods assessment
should align
Objectives -
ID type of audit
Obtain
E.g, To evaluate understanding Risk
the areas Engagement
reasonableness objectives Planning the
of the org’s Criteria audit
sales figures Work programme engagement
1200 – Proficiency and DPC 2200 – Planning the audit (see pg 123)
2300 – Performing the audit
2400 – Communicating results
2500 – Monitoring results
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Planning the
Engagement Performing the
(Std 2200) Engagement
(Std 2300)
“8 steps” The Internal “4 steps”
process Audit Process process
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1: Obtain an 5: Identify engagement:
Understanding Objectives, Criteria &
Scope
2: Preliminary 6: Resource allocation
contact
3: Conduct (Tools) 7: Prepare
preliminary survey engagement
work programme
4: Identify risks 8: Final confirmation to
proceed
1: Identify Engagement
Information: Characteristics, Type
of evidence, Sources
2: Perform engagement procedures
3: Analyse and evaluate engagement
information
4: Document engagement
information
(NB: SUPERVISION)
Planning IA engagement - ‘2200 Stds’
IIA Standards
Planning the engagement
2201 2210 2220 2230 2240
Planning Engage- Engagement Resource Engagemen
a) Sub- considera- ment Scope allocation t Work
standards tions Objectives Programme
b) Steps ‘1st to 4th ‘5th Step’ ‘5th Step’ ‘6th Step’ ‘7th to 8th
Steps’ in 2220 2230 Steps’
2201 2210 Engagement Resource 2240
Refer to the Steps
under each Sub- Planning Engage- Scope allocation Engagemen
standards considera- ment t Work
tions Objectives Programme
Performing IA engagement ‘2300 Stds’
IIA Standards
Performing the engagement
2310 2320 2330 2340
Identify the Analyse and Document the Supervise the
a) Sub- information evaluate information engagement
standards information
b) Steps ‘1st and 2nd ‘3rd Step’ ‘4th Step’ ‘1st to 4th
Steps’ 2320 2330 Steps’
Refer to the Steps 2310 Analyse and Document the 2340
under each Sub-
Identify the evaluate information Supervise the
standards
information information engagement
Types of engagement procedures
(Refer to textbook: pg 143 - 145)
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TYPES OF AUDIT ENGAGEMENT and OBJECTIVES
General IC
objectives Specific IC Engagement
objectives objective
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FINANCIAL AUDIT ENGAGEMENT…expanded
General engagement
Existence objectives
Completeness
Cut-off
Specific
Accuracy engagement objectives
Rights and Obligations
Classification and allocation
Valuation
Presentation and disclosure
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