... Case 1 I would suggest Mr. Eatough report the fraud activities to the board for the following reasoning: According to the Code of Ethics, Mr. Eatough is required to engage with integrity while performing internal auditing for the company. The principle of integrity, specifically the Rules of Conduct associated with the principle state that internal auditors “shall perform their work with honesty, diligence, and responsibility” (1.1) . That is to say, Mr. Eatough is held highly responsible and hence must exercise due diligence while performing internal auditing tasks. As the internal auditor chief, Mr. Eatough has the responsibility to report any fraud to the board or higher level management. Furthermore, Standard 1130 states that “the CAE must disclose the details of the impairment to approriate parties” (p2-16), hence Mr.Eatough is required to disclose the fraud under the Standards. Chapter 3 Multiple Choice: 1. c 2.C 3.C 4.A 5.B 6.D 7.D Discussion question 7: a. Yes. Combined assurance model is a effective method that understands the different types of assurance being provided, hence it will not cause “assurance fatigue” but effectively combine the assurance performed by different parties. b. the objectives set by board and senior management; the internal audit charter; the communication results between the CAE and other assurance providers; the evidence or document that show that other parties have effectively performed assurance. c. consulting and providing...
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...Internal Auditor This brief will study the subject of using an internal auditor to assist a company with a system currently not working. It will also examine a candidate qualified to assess the organization and can make recommendations to the company. This can help ensure the company conforms to regulations set forth by the Securities and Exchange Commission (SEC), System Not Working The company has realized that their risk management efforts were not meeting expectations to problematic situations. They are looking to implement procedures that can ensure the company can control their systems. The company has divisions not always following the correct processes, such as existing safeguards that can cause inventory control to be nonexistent and cash flows to be inaccurate. When the departments are not working together in an effort to complete goals and follow policies the company needs to implement internal controls. One of the requirements that the SEC has for management is that they take “responsibility for establishing and maintaining adequate internal control over financial reporting” (U.S. Securities and Exchange Commission, 2013, Summary). What this means is that to be compliant with Section 404 of the Sarbanes-Oxley Act (SOX) the company will need the assistance of an internal auditor to help management’s assessment and ensure they are within compliance. Working System The main requirement for...
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...Question No. 1 The primary responsibility of external auditor is to report on the organisation's financial statements. The external auditor’s aim is to determine whether the statements fairly present the financial position of the organisation and the result of its operations for the period. But the Internal Auditors have a different function. It is broader and deeper than that of the external auditors. It furnishes managers throughout the organisation with information needed to effectively discharge their responsibilities. Discuss. Question No. 2 Compare and contrast the functions of internal and independent (external) auditors. |Internal Auditor |External Auditor | |Is an organisation's employee, or can be an independent entity |Is an independent contractor. | |[outsourced] | | |Serves needs of the organisation, though the function must be managed |Serves third parties who need reliable financial information. | |by the organisation. | | |Focuses on future events by evaluating controls designed to assure the |Focuses on the accuracy...
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...Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.[1] Internal auditing is a catalyst for improving an organization's governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity. The scope of internal auditing within an organization is broad and may involve topics such as an organization's governance, risk management and management controls over: efficiency/effectiveness of operations (including safeguarding of assets), the reliability of financial and management reporting, and compliance with laws and regulations. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts; participating in fraud investigations under the direction of fraud investigation professionals, and conducting post investigation fraud audits to identify control breakdowns and establish financial...
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...Internal auditing covers a broad range of areas that includes a lot of regulation. Even more focus is on information technology. “As the demands of traditional audits responsibilities and the growing burden of information security evolve, the industry is beginning to see emerging trends in internal auditing departments across many organizations” (Hirth, 2012). Information technology controls continue to increase in importance to today’s organizations as reliance on technology and compliance requirements increase. Deficiencies in information technology controls can have a significant impact on the organization. According to a 2011 presentation by public accounting firm Deloitte & Touche, the following are some of the top emerging information technology emerging issues. Social networking and social media technologies is expanding into new areas, including user communities, business collaboration, and commerce. The risks in this area include brand protection, unauthorized access to confidential data, and regulatory or legal violations. Historical audits are not sufficient to determine risks in this area as the medium is constantly changing. The audit plans should be updated every year based on a review of social media usage within the company with an eye on emerging risks. Mobile devices, including cell phones and tablets have become common workplace tools. These devices do not maintain the same level of data security as the organizations stationary network. There is...
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...The independence of internal auditing in China Term Paper Advanced Auditing February, 15 * The independence of internal auditing in China Abstract China’s rapid economic growth boosted its accounting system that has evolved at a singular rate. The national government encourages foreign investors to participate in the domestic capital market actively. The government also strictly supervises the different national economic activities; as a result, the credibility of the auditing system plays a important role. Chinese government as well as some firms seek reliable and independent internal audit services. This paper will examine some factors which may cause lack of independence in Chinese internal audit systems, the difference between the internal auditing in China and in western countries. Based on interviews and questionnaires, suggestions are made for future improvement on the internal audit system in China. Key words: internal auditing, audit independence I INTRODUCTION The globalization of economy, complexity of business and allegations of fraudulent financial reporting have recently sharpened the ever-increasing attention to internal controls and internal auditing. (Karagiorgos et al., 2009) The role of internal auditing is also evolving as reflected in the following definition ‘an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing...
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...Casualty Actuarial Society Committee on Enterprise Risk Management has adopted the following definition which includes the purpose of ERM : “ERM is the discipline by which an organization in any industry assesses, controls, exploits, finances, and monitors risks from all sources for the purpose of increasing the organization’s short – and long-term value to its stakeholders.” In the US, COSO published its ERM-Integrated framework in 2004. COSO identified a need for robust framework to help companies effectively identify, assess, and manage risk. The resulting framework has eight components and four objectives. The eight components are:- * Internal Environment- It encompasses the tone of an organization, and sets the basis for how risk and control are viewed and addressed by an entity’s people. * Objective setting –Objectives must be aligned with the organization’s risk appetite, which derives risk tolerance levels for the organization. * Event identification-Management identifies potential events that, if they occur, will affect the entity’s ability to successfully implement the strategy and achieve objectives adversely or positively. * Risk Assessment-It allows an entity to consider the extent to which potential events have an impact on achievement of objectives. * Risk response-It includes risk avoidance, reduction, sharing and acceptance. * Control Activities-These are the policies & procedures that help ensure the management’s risk responses...
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...Subject: Immediate Internal Controls Evaluation Date: October 13, 2014 Beemer’s internal control system may be outdated and in need of evaluation, and perhaps redesign. As we are all one team, it is important that every one of us is informed of Beemer’s most current internal control policies. With that said, I am expecting that you will pass this information on to your respective departments. This memo will answer the following questions: 1. What are internal controls? 2. How will this benefit this company? 3. What does this mean for me? Internal controls are procedures that are put in place to ensure the integrity of information distributed by organizations. These procedures help safeguard assets and avoid error within organizations, as well as protect against any acts of fraud that may occur. While these procedures are implemented for protection purposes, they are also useful to increase efficiency in the workplace. For example, proper controls can help to maintain records of important transactions, and insure that Beemer’s stays compliant with the law. The evaluation and possible redesign of Beemer’s internal control procedures will ensure that the company has a trusted system in place to protect against error and fraud. Not only does this organization want the latest and most effective internal control system in place, but it is also important to update these systems regularly. Consistently revamping and improving the internal control system will...
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...ABSTRACT This research work deals with internal audit as an aid to management. It aims at finding out the role of internal audit in management decision making in organizations. It is a survey research. Data were collected from primary and secondary sources which included using questionnaires, personal observations, text book, journal and internet. Sample of 92 were collected by random sample method. Three hypotheses were formulated and tested using Z-test statistics, while questionnaires were analyzed using simple percentages. We discovered among other things that internal audit assists management in managerial decisions. We recommended among other things that the auditors be trained in forensic accounting to enable them to be more effective in their duties. pg. 8 CHAPTER ONE INTROUCTION 1.1 BACKGROUND OF THE STUDY. At the beginning of the century, most businesses are small and sole-operated. The owners/managers are overly involved with most of the decision making. As business grows in size and complexity, professional managers take position of the owners and the operators. Consequently, they rely heavily upon streams of accounting and statistical report which summarizes current happenings and conditions in the enterprise. The information carried by these streams of report enables management to control and direct the enterprise in order to assure management that the information received are both reliable and accurate. A system of internal audit is developed to monitor the activities...
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...of solid wood, the desk alone was rumored to be worth more than $10,000. Then there was the addition of over 50 workstations and related equipment to the administrative computer system, when, it was claimed, cheaper microcomputers would have done the job. Apparently, the equipment had been acquired without board approval, on the authorization of the vice president for business affairs, and had cost more than $290,000. In addition to these complaints, there were allegations that Lockwood had used cars from the university motor pool as personal vehicles; and also misused his authority with regard to the purchase of insurance policies. In response to these complaints, the president requested that Keith Tiller, the director of internal auditing, conduct a review of the Harris Hall purchasing procedures and university purchasing policies. During the course of the review, the president expanded its scope to include the award of university insurance contracts. It was Carter's charge to analyze Tiller's findings and report her conclusions directly to the president, along with any recommendations for changes. Tiller's report now lay on her desk. The president expected her response within the week. MILIANAW UNIVERSITY The University is controlled by a board of trustees, who are appointed by...
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...THE ROLE OF INTERNAL AUDITING IN FRAUD PREVENTION AND INVESTIGATION. INTRODUCTION. Internal auditing is charged with the overall responsibility of reviewing, evaluating and monitoring the organization’s internal controls to ensure efficiency. Its functions include a detailed testing of transactions and balances, and performing routine or sometimes, random checks as a precautionary measure. During this process, an auditor might uncover fraudulent practices, which would otherwise have gone unnoticed. This paper intends to clarify the difference between auditing and fraud investigation, fraud indicators, highlight the role of audits in fraud prevention and investigation. THEORETICAL FRAMEWORK AND CONCLUSION. Paul A. Rodrigues said, “It has been aptly said that auditors look at the ‘donut’ and fraud examiners look at the ‘hole’” (Auditing vs. Fraud Examination, para. 2). That statement indicates a difference between auditing and fraud investigation; audits are reoccurring (on a regular basis), fraud investigations are not (only when there is sufficient predication); an audits scope is general, that of fraud investigations are specific (allegation based); an audit’s objective is to express a general opinion, a fraud examination’s is to affix blame where an allegation is confirmed (adapted from the ACFE Fraud Examiners Manual). That being said, an internal audit is party to a fraud investigation along side forensic investigators, legal counsel, law enforcement and the lot...
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...LES 1. Praktijkopdracht 2. Corporate governance & internal auditing Corporate Governance wordt uitvoerig besproken in het jaarverslag van 2012 van Inditex. ZARA is onderdeel van deze organisatie. Zo kent de Inditex Groep een ‘duurzaamheidsstrategie’. ZARA streeft naar het bevorderen van duurzame ontwikkeling in de samenleving en omgeving en heeft deze aspecten dan ook in haar bedrijfsmodel geïntegreerd. Interne auditafdeling Audit & Control Committee In onderstaand figuur is de plaats van de interne audit te zien in de organisatie van Inditex, waar ZARA onderdeel van uitmaakt. ZARA kent een Audit and Control Committee die de auditafdeling aanstuurt. Deze committee bestaat uit een voorzitter, secretaris en 5 bestuursleden. De hoofdactiviteiten van de audit & control committee zijn als volgt weergeven: * Periodieke financiële informatie, jaarrekening en accountantsverklaring De audit & control committee herziet de financiele en economische informatie, voorafgaande aan de goedkeuring door het Raad van Bestuur. Hiermee overlegt zij met het managementteam en de externe accountant. * Efficiëntie en onafhankelijkheid van de accountants * Interne & externe audit De directeur van de interne (en externe) auditafdeling zijn aanwezig bij de vergaderingen die de Audit & Control Committee houdt. In deze vergaderingen dient het committee naar behoren geinformeerd te worden door de interne auditafdeling. De audit en control committee overziet...
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...COLLEGE OF BUSINESS UNIVERSITI UTARA MALAYSIA COURSE CODE : BKAA3023 COURSE NAME : AUDITING AND ASSURANCE II PRE-REQUISITE : AUDITING AND ASSURANCE I _____________________________________________________________________ 1. SYNOPSIS This is a continuation of Audit and Assurance 1. It intends to strengthen and enhance the students’ understanding in auditing. Among the topics that will be discussed are code of ethics, auditors’ liability and in-depth explanations on analytical procedures, computer assisted audit techniques, audit sampling, materiality and audit risk, group audit and current issues facing the auditing profession. This course will justify other activities than financial statement audit that can be performed by a public accountant like performance/operational audit, internal audit and compliance audit. 2. COURSE OBJECTIVES This course intends the student: 1. To comprehend applicable regulations, legal responsibilities and ethical standards and current issues facing the audit profession. 2. To appreciate the concepts of internal control system and the use of computer assisted audit techniques in auditing a computerised environment. 3. To understand and apply audit risk, materiality, and statistical and non statistical audit sampling techniques. 4. To be familiar with related issues in audit completion, group audit, internal audit and related audit services and other services that can be provided by the public accounting...
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...Audit and Assurance Services Chapter 1 1 Learning Objectives 1. What is auditing? Distinguish between auditing and accounting. Importance of auditing in reducing information risk. 2. Distinguish audit services from other assurance and non-assurance services provided by CPAs. 3. Three main types of audits. 4. How to become a CPA? Identify the primary types of auditors. 2 What is auditing? Evaluating 3 Nature of Auditing Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person. 4 Audit Reporting -- (Expressing Opinions) The final stage in the auditing process is preparing the Audit Report, which is the communication of the auditor’s findings to users. 5 Information and Established Criteria To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information. 6 Accumulating Evidence and Evaluating Evidence Evidence is any information used by the auditor to determine whether the information being audited is stated in accordance with the established criteria. Transaction data Client inquiry Written and electronic Communications with outsiders Observations 7 Competent, Independent Person The auditor must be qualified...
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...01 An Introduction to Assurance and Financial Statement Auditing True / False Questions 1. | Independence standards are required for audits of public companies, but not for audits of private companies. True False | 2. | Decision makers demand reliable information that is provided by accountants. True False | 3. | Information asymmetry seldom occurs. True False | 4. | Conflicts of interest often occur between absentee owners and managers. True False | 5. | Auditing services and attestation services are the same. True False | 6. | Auditing is a type of attest service. True False | 7. | Testing all transactions that occurred during the period is cost prohibitive. True False | Multiple Choice Questions 8. | Why do auditors generally use a sampling approach to evidence gathering? A. | Auditors are experts and do not need to look at much to know whether the financial statements are correct or not. | B. | Auditors must balance the cost of the audit with the need for precision. | C. | Auditors must limit their exposure to their auditee to maintain independence. | D. | The auditor's relationship with the auditee is generally adversarial, so the auditor will not have access to all of the financial information of the company. | | 9. | Which of the following statements best describes a relationship between sample size and other elements of auditing? A. | If materiality increases, so will the sample...
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