The Internal Auditing Handbook 2nd Edition K. H. Spencer Pickett - Solutions

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4 List the main elements of an anti money laundering programme that should be followed by a firm of professional accountants.(1) ……………………….(2) ……………………….(3) ……………………….(4) ……………………….(5) ……………………….(6)
3 Auditors are responsible for a company's system of internal controls.True False
2 List four potential duties of the audit committee.(1) ……………………….(2) ……………………….(3) ……………………….(4) ……………………….
1 Fill in the blanks:ISAs are set by the ........................................ ........................................ ................................................................................ ........................................ ........................................ . This is a
Explain why professional internal auditing standards are important in enhancing the role and status of the internal auditor.
Describe the framework of the IIA standards and list some of the areas covered in a selection of the Attribute and Performance Standards that are issued by the IIA.
Discuss the need for exercising due professional care when performing internal audits and explain why this is becoming increasingly important.
Describe the different types of consulting services that may be performed by the internal auditor and explain how management consultants also work to professional standards.
Explain why quality is important to the internal audit service, and describe steps that may be taken to ensure quality standards are defined, enhanced and applied by internal audit staff.
Discuss why it is important for internal auditors to have a clear view of the various clients for their services.
Contrast internal and external reviews of the internal audit shop and describe the areas that may be addressed by an external review of internal audit.
Describe the use of one of the following four management techniques: ISO 9000, Charter Mark, EFQM, IiP.
Discuss why it is necessary to market the internal audit role and describe efforts that may be taken to ensure the marketing strategy helps secure the future prospects of the internal audit shop.
Prepare a presentation to the internal audit management team on how a successful internal audit service may be promoted through continuous improvement.
Explain the agency concept and discuss why is it important to secure accountability in companies where ownership is separated from management.
Describe why a corporate code of ethics is important and list some of the matters that may be covered in a typical code.
Outline two well-known scandals that have demonstrated the need for proper corporate governance and suggest reasons why these problems have occurred.
Discuss the concept of corporate governance and describe some of the issues that are addressed in international stock exchanges (and public sector) codes.
Describe the matters that organizations are reporting in their published annual corporate governance statements and suggest ways that these reports can be improved.
Describe the role of external audit and explain the difference between the external and internal auditing roles.
Discuss why audit committees are becoming popular and describe the areas that may fall under the remit of the audit committee.
Explain how internal audit fits into the corporate governance equation, and outline what the corporate governance codes say about the value from internal audit.
Describe the links between corporate governance, risk management and internal control.
Prepare a presentation to the board on the importance of preparing a robust statement on the organization’s system of internal control for the published annual report.
List and describe some of the matters that may fall under the guise ‘frequently asked questions’ from users of the internal audit website.
Explain what makes a good auditor in terms of competencies, and describe what the CAE may do to ensure these competencies are developed and maintained.
Which is the most appropriate statement?a. Internal audit is a nearly full-blown profession. This means it has a clear set of professional standards and is able to work to best practice guidelines in delivering a quality service.b. Internal audit is now a full-blown profession. This means it has a
Insert the missing words:The charter formally documents the . . . . . . . . . . . . . . . . . . . . . . of the audit functiona. raison d’ˆetreb. expectationsc. desiresd. independence
Which is the odd one out?The audit charter establishes audit’s position within the organization and will address several issues:a. The nature of internal auditingb. The audit objectivesc. The scope of audit workd. The staffing levelse. Audit’s responsibilitiesf. Audit’s authority g. Outline
Which four of the following statements are inappropriate?a. The charter should be simple and short, preferably contained within a single sheet of paper that will fit on a web site screen.b. The concept of audit independence should be highlighted.c. If senior management in the organization does not
Insert the missing words:Internal audit shops that focus on the . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , rather than take on any work that comes its way, will tend to have a better direction.a. control compliance arrangementsb. management referralsc. financial
Insert the missing words:The . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . can be used as a framework for developing appropriate audit services. The question to ask is: how can we best contribute to risk management, control and governance services, through both our
What is abc?All definitions of internal audit contain the word ‘abc’ and this is an important component of the audit role. It is both a concept and an ideal. One could assume that since internal audit is located within the organization it cannot be abc.a. outstandingb. reliablec. flexibled.
Which bullet point is wrong?There are many positive images that are conjured up by this concept of independence:a. Objectivityb. Impartialityc. Unbiased viewsd. Valid opinione. No spying for managementf. Not many ‘no-go’ areas g. Sensitive areas audited h. Senior management audited i. No
Which of the following statements is most appropriate?a. Where internal audit reports to the FD, this enhances the status of the audit process and promotes good audit work.b. Where internal audit reports to the FD, a careful approach has to be negotiated to secure the degree of independence that
Which of the following statements is most appropriate?a. The policy of talking to management and incorporating their needs into the project terms of reference creates a positive process but may be manipulated to lessen the level of independence. One would accommodate management’s views but only
Insert the missing words:Courtemanche discusses four styles of auditing that are akin to adopted audit philosophies:a. The . . . . . . . . . . . : The auditor represents an outside interest with a regulatory role in the organization. (one word)b. The . . . . . . . . . . . . . . . . . : The audit
Which of the following factors is wrong?The Rittenberg model on audit independence contains several factors:a. Organization: This deals with the position of audit within the organization and covers all relevant factors including reporting levels, top management support, audit committees and the
Insert the missing words:The CAE should continuously seek out ways to improve the level of objectivity throughout audit and some of the relevant matters have been mentioned earlier. A great deal of this hinges on installing suitable . . . . . . . . . . . . . . . . . . . . , the aim being to remove
Insert the missing words:The client might wish to have internal audit perform a series of consultancy projects generated by ad hoc problems that they as managers may experience. The professional auditing standards seek to promote audits that involve reviews of control systems as a service to the
Which of the following statements is most appropriate?a. Where there is a conflict between consultancy and audit services, then this needs to be handled with care.b. Where there is a conflict between consultancy and audit services, then the CAE should monitor the projects.c. Where there is a
Which of the following statements is most appropriate?a. Independence must be guarded at all costs and sufficient independence is needed to enable professional audit work to be carried out and acted on by management.b. Independence cannot be guarded at all costs and only sufficient independence is
What is ‘xxx’?A xxx is necessary and appropriate for the profession of internal auditing, founded as it is on the trust placed in its objective assurance about risk, control and governance. The xxx applies to both individuals and entities that provide internal audit services.a. dedicated audit
Which model is wrong?The late Gerald Vinten has developed three models of morality:a. The regulatory model. This approach sees the question of morals as being based on instructions from the appropriate authorities.b. The compliance model. This model argues that people need to comply with ethical
Which of the following is wrong?The alternatives to the word ‘Audit’ from a standard thesaurus include the following terms:a. examinationb. scrutinyc. inspectiond. investigatione. consultantf. review
Insert the missing words:Auditors should be skilled in dealing with . . . . . . . . and as such this aspect is seen as a valid audit skill. Unfortunately, this skill does not always form part of the auditors’ professional training and development programme. In fact, a poor recruitment policy may
Insert the missing words:Researchintothe ‘ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ’ shows that formal long-winded audit reports have little impact on busy managers. They want to know in short simple words‘what the problem is, and what they should therefore
Insert the missing figures regarding attitudes among employees towards internal auditors from the selection below (per Churchill):ATTITUDE %NEGATIVE NEUTRAL POSITIVE MIXEDa. 02%b. 24%c. 26%d. 48%
Insert the missing figures regarding perception of who internal auditors were most like (per Churchill):RESEMBLES %TEACHER POLICEMAN ATTORNEY MIXEDa. 08%b. 11%c. 23%d. 58%
Which of the following suggestions is wrong?Mints set out a number of ways that auditor/auditee relations might be improved:a. Better understanding and communications by the auditor.b. Use a mutual problem-solving, rather than blame assignment approach in line with participative team building.c.
Insert the missing word:Relationships consist of various transactions:The most efficient working model is where the . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .a. ‘child’ communicates with the ‘child’.b. ‘child’ communicates with the ‘adult’.c.
Insert the various words into the most appropriate Box of the table:FACTOR TRADITIONAL STYLE PARTICIPATIVE STYLE ROLE Box 1 Box 2 AUTHORITY Box 3 Box 4 SOURCE OF AUTHORITY Box 5 Box 6 SANCTION Box 7 Box 8a. Advisorb. Coercionc. Formald. Informale. Officef. Personal attributes g. Policeman h.
Which of the following statements is inappropriate?There is great scope in participative auditing and it has several positive features that can be summarized:a. It involves management in the auditing process as part of the team rather than using audit as a management spy.b. It is not merely a
Insert the missing word:Client expectations of . . . . . . . . . . . . . . . . . . . . internal audit services typically consist of:• A check on remote establishments to ensure that they are complying with procedures.• The investigation of frauds where they have been detected within the
Insert the missing word:. . . . . . . . . . . . managers may be defined as senior officers who are working to objectives that are inconsistent with organizational objectives.a. Delinquentb. Motivatedc. Confusedd. Unaudited
Which statement is least appropriate?The benefits of training for internal auditors includes:a. Increase in the quantity of work done by auditors.b. Better quality of work.c. Cost savings in terms of better overall performance.d. Better standard of report writing.e. Better quality of working
Insert the missing words:The ‘ . . . . . . . . . . . . . . . . . syndrome’ results because organizations view internal audit as an ideal place to train managers.a. short-stayb. professional-auditorc. career auditord. long-stay
Explain the importance of internal controls to a business and describe management’s responsibilities regarding these controls.
Describe the COSO control framework and discuss each of the five components.
Describe the CoCo control framework and discuss each of the components.
Discuss some of the issues addressed by other control standards such as BASEL and COBIT.
Explain the link between risk management and internal control.
Describe the different types and categories of controls that exist in most large organisations and explain what could go wrong, even where controls are meant to be in place.
Discuss the importance of good operational procedures and how such procedures might be established within an organisation.
Describe some of the issues addressed in the control model used in this chapter and explain the way each component of the model contributes to promoting good controls.
Discuss the view that controls can only provide reasonable and not absolute assurances that objectives will be achieved.
Prepare a presentation to the internal audit management team on developing and implementing control awareness seminars for key staff across the organisation.
Which is the most appropriate statement?a. Where there are risks to the achievement of objectives, this means failure is a strong possibility, and controls have to be put in place to address these risks. If not, success becomes likely. At the same time, controls cost money and they have to be
Insert the missing phrase:The Turnbull Report suggests that: A company’s system of internal control has a key role in the management of risks that are significant to the fulfilment of its business objectives. A sound system of internal control contributes to safeguarding the. . . . . . . . . . .
Insert the missing phrase:The . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . should also set the tone of the company and cover ethical values, management’s philosophy and the competence of employees.a. control environmentb. ethical environmentc. risk frameworkd. value
Which is the most appropriate statement?a. Effective controls are measures that work and ensure that operations are successful and resources protected.b. Effective controls are measures that work and give a reasonable probability of ensuring that operations are successful.c. Effective controls are
Which is the odd one out?Turnbull provides some background as to what makes up a sound system of internal control:an internal control system encompasses the policies, processes, tasks, behaviours and other aspects of a company that, taken together:a. facilitate its effective and efficient operation
Insert the missing phrase:The trend towards . . . . . . . . . . . . . . . . . . . . . . . . . where each business audit is pretty well autonomous depends on a series of boundaries set at local levels throughout the organisation.a. centralized organisationsb. structured organisationsc. fragmented
Insert the missing phrase:It is only be considering the . . . . . . . . . . . . . . . . . . . . . . . . . that the internal auditor is able to make board level declarations concerning internal control.a. adopted controlsb. adopted control modelc. approved controlsd. individual internal controls
Which is the odd one out?Each component of the COSO model is listed:a. Control Environmentb. Risk Assessmentc. Risk Managementd. Control Activitiese. Information and Communicationf. Monitoring
Which is the most appropriate statement?The Control Environment has been described by COSO asa. The control environment sets the tone of an organisation, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and
Which is the most appropriate statement?Risk assessment has been described by COSO asa. Every entity faces a variety of risks from internal sources that must be assessed. A precondition to risk assessment is establishment of objectives, linked at different levels and internally consistent.b. Every
Which is the most appropriate statement?Control Activities have been described by COSO asa. Control activities are the policies and procedures that help ensure management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the entity’s
Which is the most appropriate statement?Information and Communications has been described by COSO asa. Pertinent information must be identified, captured and communicated in a form and time frame that enable people to carry out their responsibilities. Information systems produce reports, containing
Which is the most appropriate statement?Monitoring has been described by COSO asa. Internal control systems may need to be monitored – a process that assesses the quality of the system’s performance over time. This is accomplished through ongoing monitoring activities, separate evaluations or a
Which is the odd one out?COSO simply asks several key questions:a. Do we have the right foundations to control our business?b. Do we understand all those risks that stop us from being in control of the business?c. Have we implemented suitable control activities to address the risks to our
Please list the main components of CoCo a.b.c.d.e.
Which is the most appropriate statement?a. The equation is quite simple. Controls are needed if they guard against an unacceptable risk to the business or if they are part of a legal or regulatory compliance regime.b. The equation is quite complex. Controls are needed if they guard against an
Which is the odd one out?Control mechanisms are all those arrangements and procedures in place to ensure the business objectives may be met and they should exhibit certain defined attributes:a. They should be clearly defined and understood by all users.b. Mechanisms should be established to monitor
Insert the appropriate code (Dir, P, Det or C after each example below.Another way to classify controls is to break them down into: Directive (Dir), Preventive(P), Detective (Det) and Corrective (C):a. Fire alarmsb. Staff awareness training where the importance of guarding against firec. Fire
Which two are the odd ones out?In terms of assessing the suitability of systems of internal control, there are some danger signs that should be looked for that might lower the efficiency of the control environment as follows:a. Ability of senior management to override accepted controlb. Absence of
Insert the missing word:It has been said about the importance of understanding soft controls:As managements move into . . . . . . . . . . . . . . . . . . . . modes, they need help with the transition. Most of all, they need us to be an independent, objective observer who will give them the kind of
Insert the missing phrase:There is a view that the auditor should know more about the system under review than management and as such may tell them how best to perform their managerial duties. This is false since it is managers who must understand their areas of responsibility and audit’s role is
Which is the odd one out?By going through the nine-point stage model, there is a better change to get procedures both correct, understood and accepted in the operation in question. Taking each stage of the model in turn:1. Development: This involves reviewing the underlying processes, simplifying
Which is wrong?Measures are needed to give the organisation its best chance of achieving success. To sum up, it may be suggested thata. controls tend to cost money and slow an organisation down.b. controls are needed to help manage risks to an organisation’s business.c. controls can guarantee
Insert the missing phrase:This is important so that control frameworks don’t just contain activities, but also allow for some experimentation and innovation, that . . . . . . . . . . . . . . . . . . . . but still sit within the constitution. An enterprise may give someone a budget and tell them
Which is the odd one out?The success of control awareness training depends in part on several main drivers:a. a corporate policy on risk and internal control.b. a zero tolerance policy in terms of errors and sick leave.c. the board’s involvement.d. staff competencies that include a good
Insert the missing words:If there is a sound system of corporate governance in place and if this underpins a robust control environment then an organisation may develop a control policy, perhaps as part of the risk policy. Where these considerations have been addressed, control awareness training
Provide a commentary on the issues raised in the paper on ‘Dialectics and Internal Audit,’and how this work contributes to the development of the audit perspective.
Discuss the definition of internal auditing and how the wide scope of work represents a challenge for the internal auditor.
Explain the importance of an up-to-date audit charter and comment on the items that will feature in the charter.
List the types of services provided by internal audit shops and comment on the implications of the wide variety of these services.
Explain why independence is important to the internal auditor and discuss the issues that should be considered in ensuring internal audit is sufficiently independent.
Discuss the need for a suitable code of ethics for the internal auditor and describe some of the items that should form part of such a code.
Explain the need for good working relationships between the internal auditor and the client and discuss why there may be problems with differing expectations, and suggest how these problems may be overcome.

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The Internal Auditing Handbook 2nd Edition K. H. Spencer Pickett - Solutions

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