Internal Audit – Knowsia

PSAF – L2 – Q16.4 – Internal Audit Functions

Explain the four functions of internal audit in the public sector.

Question

16.4 FUNCTIONS OF INTERNAL AUDIT

Internal audit effectiveness is at the heart of public sector governance. In recent public financial management reforms, the role of internal audit has been emphasized. Further, the support role of Audit Committees to internal auditors has been emphasized.

Required:

(a) Explain the four functions of internal audit in public sector.

(b) Discuss five advisory roles and responsibilities of Audit Committees.

Answer

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Tags: Compliance, Financial management, Internal Audit, Public Sector Governance, Risk Management
Level: Level 2

Topic: Public expenditure and financial accountability framework

PSAF – L2 – Q15.4 – Public Financial Management Audit

Discuss four responsibilities of the Internal Audit Agency and Audit Service in public financial management.

Question

(a) Internal audit and external audit functions are critical to ensuring effective management of public resources. While the two functions lie in two separate organizations, both can co-operate and co-ordinate their functions in a manner that will promote value for money in the auditing space.

Required:

(a) Discuss four responsibilities of the:

(i) Internal Audit Agency; and

(ii) Audit Service.

(b) Explain four ways that the two institutions in question (a) can co-operate to ensure effective audit in the public sector.

Answer

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Tags: Accountability, Audit Coordination, Audit Service, External Audit, Governance, Internal Audit, Internal Audit Agency, Public Financial Management
Level: Level 2

Topic: The context of public financial management

PSAF – L2 – Q15.3 – Public Expenditure and Financial Accountability Framework

Discuss five functions of the Internal Audit Agency in public financial management.

Question

(a) A missing link in public financial management is the lack or weak internal audit function in covered entities. In 2003, the Internal Audit Agency was established to provide oversight on internal audit in the public sector.

(b) Suggest five practical strategies that the Internal Audit Agency can use in promoting effective internal audit in the public sector.

Answer

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Tags: Accountability, Governance, Internal Audit, Oversight, Public Financial Management
Level: Level 2

Topic: Public expenditure and financial accountability framework

PSAF – L2 – Q5.2- Ethical Principles in Public Sector Accounting

Discuss breach of confidentiality by an audit officer sharing audit evidence on a messaging group.

Question

(A) You are a Junior Internal Audit Officer of a regulated entity, and you have conducted an internal audit of some sensitive operations of the entity. The audit covers allowances and bonuses paid or due for payment to the Council Chairperson and other members of the board of governors, including the Managing Director. The transactions and events indicate profligacy and corruption, given the current financial difficulties the entity faces. You took a snapshot of the audit evidence with your phone camera and posted it on your private messaging group to support a claim of corruption you made. This has attracted a lot of traffic to your post, and one of the group members, who is a journalist, decided to spark a bigger debate on the matter in the mainstream media. Your post went viral within 24 hours.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario. (B)

In early December 2022, your District Council received an unplanned visit from top political figures who claimed to be on a political campaign and decided to pay a “courtesy call” on the District Administrator and the Council. The District Administrator quickly asked that a financial package (brown envelope) be prepared for them. The amount was significant but unbudgeted. The visitors left the Council with high commendation from the District Administrator. Thereafter, he asked the Finance Manager to process the necessary documentation to support the brown envelope transactions. The Finance Manager expressed some misgivings about the transactions but advised the accountant to record the brown envelope transaction as “goods and services” under “travel and transport,” which he did without objection.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario. (C)

A Finance Manager of a regulated entity has been at his post for the last two years, and it has become an open secret in the entity that he does not know his job. Since his assumption, the entity has not been able to submit the required quarterly and annual public accounts to the Controller and National Auditor. Auditors have raised many audit observations indicting the entity for poor accounting practices. The financial records are in shambles, the financial statements are in disarray, and the cash management is unfortunate. He secured the job based on his political activism rather than accounting professionalism.

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario. (D)

The Finance Manager was touted as the smartest accounting person in Zamara by the Managing Director of the entity. He claims that he always covers for him and delivers him from the corrupt league of public officers. He brags: “This Finance Manager, I have yet to meet his kind of accountant. He understands the language; just discuss it with him, and it is done. Whatever you want. The guy is the smartest of the smart. Even the National Auditor himself can audit him and the report will be clean. I just love this guy because he knows how to cook the books well.”

Required:
Discuss the specific ethical principle(s) of professional accountants that has been breached and suggest a safeguard for this scenario.

Answer

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Tags: Confidentiality, Ethics, Internal Audit, Professional conduct, Public Sector Accounting
Level: Level 2

Topic: Public expenditure and financial accountability framework

FM – L2 – Q3.3 – Public expenditure and financial accountability framework

Name and explain objects of enactments for external and internal audit in public sector.

Question

Audit is a very important vehicle for accountability in the public sector. Therefore, appropriate enactment is made to govern and regulate external audit and internal audit in the public sector of the Republic of Takoradi.

Required:

(a) Name and explain the objects of the two enactments that govern and regulate external audit and internal audit in the public sector respectively.

(b) Discuss four responsibilities each of the following institutions under the respective enactments:

(I) Audit Service.

(ii) Internal Audit Agency.

Answer

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Tags: Audit, External Audit, Internal Audit, Legislation, Takoradi
Level: Level 2

Topic: Public expenditure and financial accountability framework

AAA – L3 – Q52 – Internal audit and outsourcing

Compare and contrast assurance and consulting audit activities per IIA's internal auditing definition.

Question

The IIA’s definition of Internal Auditing states, among others that: “Internal Auditing is an independent, objective assurance and consulting activity….”

Required:

Compare and contrast an Assurance and a Consulting Audit activity.

Answer

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Tags: assurance activity, Audit comparison, consulting activity, IIA definition, Internal Audit
Level: Level 3

Topic: Internal Audit and Outsourcing

AA – L2 – Q57 – Internal Audits

Explain the usefulness of internal audit work, quality factors, and audit evidence for outsourced functions at SkyHigh Airlines.

Question

SkyHigh Airlines is an airline. The company owns some of its fleet of aircraft. Other aircraft are leased from third parties. SkyHigh Airlines has an internal audit function that has recently expanded. Your firm is the external auditor to SkyHigh Airlines. Your firm has been asked to investigate the extent to which it may be able to rely on the work of internal Angelfire International

Required:

(a) Explain why the work of internal auditors, in the three areas noted above, is likely to be useful to you as the external auditor. (9 marks)

(b) Explain how the quality of the internal audit function is likely to influence the extent of your reliance on internal audit work. (5 marks)

(c) Describe the audit evidence you will seek relating to internal controls over the outsourced functions (in-flight catering and payroll). (6 marks)

Answer

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Tags: Audit Evidence, Audit Procedures, External Audit, Financial Statement Assertions, Internal Audit, Internal controls, Outsourcing
Level: Level 2

Topic: Internal Audits

AAA – L3 – Q46 – Internal audit

Assess the need for an internal audit function at Adepa Ltd, considering its growth and technology adoption.

Question

Adepa Ltd, a fruit processing company, has been in operation for many years. It has managed to grow the business over the years and now has eight branches, four in rural areas and four in urban towns, in addition to the head office. The management and those charged with governance are looking forward to the company adopting the latest technology in production – Advanced Technology Manufacturing (ATM) and marketing and sales through the internet.
During the last audit of the financial statements of the company, the Managing Director suggested to the Senior Partner an assessment of the need for an internal audit function in the company. You were the audit manager who led the engagement team to do the audit. The Senior Partner has therefore asked you to carry out the assignment to assess the need for an internal audit in Adepa Ltd.
Required:
Draft a report to the Senior Partner on the assessment of the need for an internal audit function for Adepa Ltd., highlighting the factors to be considered in such assessment.

Answer

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Tags: Assessment, Internal Audit, Outsourcing
Level: Level 3

Topic: Internal Audit and Outsourcing

AA – L2 – Q54 – Audit Evidence

Audit tests for Nexis Beverages' PureTrack system and year-end inventory records to ensure accurate financial statement figures.

Question

Nexis Beverages manufactures and distributes soft drinks. Its inventories are controlled using a real-time system which provides accurate records of quantities and costs of inventories held at any point in time. This system is known within the company as the ‘PureTrack’ system and it is integrated with the purchases and revenue system. Nexis Beverages has an internal audit function whose activities encompass inventories.
No year-end inventory count takes place. Inventories are held in several large warehouses where non-stop production takes place.
Your firm is the external auditor to Nexis Beverages and you have been asked to perform the audit of inventories. Inventories include finished goods and raw materials (water, sugar, sweeteners, carbonating materials, flavourings, cans, bottles, bottle tops, fastenings and packaging materials).
Your firm, which has several offices, wishes to rely on the ‘PureTrack’ system to provide the basis of the figure to be included in the financial statements for inventories. Your firm does not wish to ask the company to conduct a year-end inventory count.

Required:
(a) Describe the audit tests that you would perform on the ‘PureTrack’ system during the year in order to determine whether to rely on it as a basis for the raw materials and finished goods figures to be included in the financial statements. (11 marks)
(b) Describe the audit tests you would perform on the records held by Nexis Beverages at the year end to ensure that raw materials and finished goods are fairly stated in the financial statements. (9 marks)

Answer

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Tags: Computerized Auditing, Internal Audit, Inventory Audit, Real-Time Systems, Substantive Procedures
Level: Level 2

Topic: Audit Evidence

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

Question

Required
(a) ISA 500 Audit Evidence identifies the different audit procedures that can be performed in order to obtain audit evidence.
Required
State, and briefly explain, five testing procedures that can be performed to obtain audit evidence.
(b) ISA 610 Using the Work of Internal Auditors explains when the work of the internal audit function can be used.
Required
State TWO criteria that the external auditor shall evaluate when assessing whether the work of the internal audit function can be used for the purposes of the audit.
(c) ISA 320 Audit Materiality provides guidance to the auditor on the concept of materiality and its relationship with audit risk.
Required
State a brief definition of materiality and state the two stages of the audit at which the auditor should consider materiality.

Answer

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Tags: Audit Evidence, Audit Risk, Internal Audit, ISA 320, ISA 500, ISA 610, Materiality, Testing procedures
Level: Level 3

Topic: Audit Evidence, Internal Audit and Outsourcing

Tag (SQ): Internal Audit

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PSAF – L2 – Q16.4 – Internal Audit Functions

Explain the four functions of internal audit in the public sector.

PSAF – L2 – Q15.4 – Public Financial Management Audit

Discuss four responsibilities of the Internal Audit Agency and Audit Service in public financial management.

PSAF – L2 – Q15.3 – Public Expenditure and Financial Accountability Framework

Discuss five functions of the Internal Audit Agency in public financial management.

PSAF – L2 – Q5.2- Ethical Principles in Public Sector Accounting

Discuss breach of confidentiality by an audit officer sharing audit evidence on a messaging group.

FM – L2 – Q3.3 – Public expenditure and financial accountability framework

Name and explain objects of enactments for external and internal audit in public sector.

AAA – L3 – Q52 – Internal audit and outsourcing

Compare and contrast assurance and consulting audit activities per IIA's internal auditing definition.

AA – L2 – Q57 – Internal Audits

Explain the usefulness of internal audit work, quality factors, and audit evidence for outsourced functions at SkyHigh Airlines.

AAA – L3 – Q46 – Internal audit

Assess the need for an internal audit function at Adepa Ltd, considering its growth and technology adoption.

AA – L2 – Q54 – Audit Evidence

Audit tests for Nexis Beverages' PureTrack system and year-end inventory records to ensure accurate financial statement figures.

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

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PSAF – L2 – Q16.4 – Internal Audit Functions

Explain the four functions of internal audit in the public sector.

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PSAF – L2 – Q15.4 – Public Financial Management Audit

Discuss four responsibilities of the Internal Audit Agency and Audit Service in public financial management.

You're reporting an error for "PSAF – L2 – Q15.4 – Public Financial Management Audit"

PSAF – L2 – Q15.3 – Public Expenditure and Financial Accountability Framework

Discuss five functions of the Internal Audit Agency in public financial management.

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PSAF – L2 – Q5.2- Ethical Principles in Public Sector Accounting

Discuss breach of confidentiality by an audit officer sharing audit evidence on a messaging group.

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FM – L2 – Q3.3 – Public expenditure and financial accountability framework

Name and explain objects of enactments for external and internal audit in public sector.

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AAA – L3 – Q52 – Internal audit and outsourcing

Compare and contrast assurance and consulting audit activities per IIA's internal auditing definition.

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AA – L2 – Q57 – Internal Audits

Explain the usefulness of internal audit work, quality factors, and audit evidence for outsourced functions at SkyHigh Airlines.

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AAA – L3 – Q46 – Internal audit

Assess the need for an internal audit function at Adepa Ltd, considering its growth and technology adoption.

You're reporting an error for "AAA – L3 – Q46 – Internal audit"

AA – L2 – Q54 – Audit Evidence

Audit tests for Nexis Beverages' PureTrack system and year-end inventory records to ensure accurate financial statement figures.

You're reporting an error for "AA – L2 – Q54 – Audit Evidence"

AAA – L3 – Q42 – Audit Evidence and Materiality

State audit testing procedures, criteria for using internal audit work, and materiality definition with audit stages.

You're reporting an error for "AAA – L3 – Q42 – Audit Evidence and Materiality"

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