1. Types of operation audits
    • functional audit
    • organizational audit
    • special assignment
  2. functional audit
    deals with one or more functions in an organization, concerning, for example, the efficiency and effectiveness of the payroll function for a division or for the company as a whole
  3. organizational audit
    emphasizes how efficiently and effectively functions interact
  4. special assignment
    management requests for an operational audit for a specific purpose, such as investigating the possibility of fraud in a division or making recommendations for reducing the cost of a manufactured product
  5. compliance audit
    conducted to determine whether the auditee is following specific procedures, rules, or regulations set by some higher authority
  6. economy & efficiency audit
    • a government audit that determines:
    • 1. whether the entity is acquiring, protecting, and using its resources economically and efficiently
    • 2. the causes of inefficiencies or uneconomical practices
    • 3. whether the entity has complied with laws and regulations concerning matters of economy and efficiency
  7. effectiveness
    the degree to which the organization's objectives are accomplished - refers to meeting objectives, such as producing parts without defects
  8. efficiency
    the degree to which costs are reduced without reducing effectiveness
  9. functional audit
    an operational audit that deals with one or more specific functions within an organization, such as payroll function or the production engineering function
  10. government auditing standards
    (yellow book) - a publication of the GAO that is widely used as a reference by government auditors and CPAs who do governmental audit work
  11. government audit
    financial or operation audits of government agencies or government-funded institutions
  12. Institute of internal auditors
    organization similar to the AICPA for internal auditors that establishes ehtical and practice standards, provides education, and encourages professionalism for its member.
  13. operational auditing
    the reivew of an organization for efficiency and effectiveness - the terms management auditing, performance auditing and this are often synonymous terms
  14. organizational audit
    an operational audit that deals with an entire organizational unit, such as a department, branch or subsidiary, to determine how efficiently and effectively functions interact
  15. program audit
    a government audit to determine the extent to which the desired results or benefits established by the legislature or other authorizing body are being achieved; the effectiveness of organizations, programs, activities, or functions, and whether the entity has complied with laws and regulations applicable to the program
  16. single audit act
    federal legislation that provides for a single coordinated audit to satisfy the audit requirements of all federal funding agencies - threshold: more that $500,000 in federal funds are subject to a single audit even if more than one agency provided funds
  17. special assignment
    management requests for an operational audit for a specific purpose, such as investigating the possibility of fraud in a division or making recommendations for reducing the cost of a manufactured produce
  18. IIA practice standards
    (Red book) - guidelines issued by the Institute of Internal Auditors covering attributes and performance of internal auditors
  19. statements on internal auditing standards
    (SIASs)- statements issued by the Internal Auditing Standards Board of the IIA to provide authoritative interpretations of the IIA Practice Standards
  20. professional skepticism
    the attitude of the auditor that "neither assumes that management is dishones nor assumes unquestioned honesty"
  21. misappropriation of assets
    fraud that involves theft of an entity's assets
  22. financial statement fraud
    an intentional misstatement or omission of amounts or disclosure with the intent to deceive users
  23. fraud
    any intentional deceit meant to deprive another person or party of their property or rights. intentional misstatement of financial statements - deliberate act
  24. five sources of information to assess fraud risk
    • 1. communications among audit team
    • 2. inquiries of management
    • 3. risk factors
    • 4. analytical procedures
    • 5. other information
  25. types o f inquiries
    • informational inquiry
    • assessment inquiry
    • interrogative inquiry
  26. informational inquiry
    obtain information about facts and details that the auditor does not have, usually about past or current events or processes
  27. assessment inquiry
    corroborate or conradict prior information
  28. interrogative inquiry
    used to determine if the individual is being deceptive or purposefully omitting disclosure of key knowledge of facts, events, or circumstances
  29. four elements in examination of a forecast
    • 1. evaluating the preparation of the prospective financial statements
    • 2. evaluating the support underlying the assumptions
    • 3. evaluating the presentation of the prospective financial statements for conformity with AICPA presentation guidelines
    • 4. Issuing an examination report
  30. reports/engagement have limited distribution
    • agreed-upon procedures
    • debt compliance letters
    • prospective financial
  31. engagements provided limited assurance
    • review
    • debt compliance
    • agreed upon procedure
  32. steps to begin a finacial statement review
    • - Obtain knowledge of the accounting principles and practices of the client's industry
    • - Obtain knowledge of the client
    • - make inquiries of management
    • - perform analytical procedures
    • - obtain letter of representation
    • - prepare documentation
  33. forecasts
    based on our best guess
  34. projections
    hypothetical assumptions
  35. included in a review report
    • 1. conducted review
    • 2. management responsible
    • 3. statement that review is less in scope than audit
    • 4. do not express opinion
    • 5. "we are not aware of any material modifications that should be made to the accompanying financial statements"
Card Set