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ACCOUNTING 420/620

REVIEW FOR EXAM 1

NOTE: THIS STUDY HELP WAS DESIGNED TO GUIDE YOUR STUDY EFFORTS.
IT IS NOT INTENDED TO BE A LIST OF EVERYTHING ON THE EXAM.

INTRODUCTION TO INTERNAL AUDITING


1. History of internal auditing
2. Definition of internal auditing
3. Independence - reporting relationships
4. Differences between internal and external auditors

INTERNAL AUDITING STANDARDS: THE IPPF


1. History of IA standards
2. IPPF – Mandatory Guidance
a. Definition of IA
b. Core Principles
c. Code of Ethics
d. Be familiar with the Standards
i. Attribute Standards (1000 series)
ii. Performance Standards (2000 series)
iii. Implementation Standards (details)
3. IPPF – Recommended Guidance
a. Implementation Guidance
b. Supplemental Guidance
4. Certified Internal Auditor – requirements

THE INTERNAL AUDITING PROCESS


1. Selection of the audit clients
a. Internal audit plan
b. Management/board requests
2. Developing annual audit plans
a. Identify audit universe
b. Rank potential audit clients according to audit priority
 Relative risk
3. Selection of audit clients for budget period
4. Develop internal audit plan

ANALYTICAL PROCEDURES
1. Definition
2. Uses of analytical procedures

1
PLANNING THE INTERNAL AUDIT
1. Establishing audit objectives – Based on Primary Objectives of Internal Control
(Standard 2120):
A – Achievement of the organization’s strategic objectives
R - Reliability and integrity of financial and operational information
E - Effectiveness and efficiency of operations
S - Safeguarding assets
C - Compliance with laws, regulations, and contracts
2. Scope
3. Expected outcomes and deliverables
4. Understand the auditee, including auditee objectives and assertions
a. Opening Conference
b. On-Site Tour
c. Document Study

BUSINESS PROCESSES AND RISKS


1. Three types of business activities
a. Operating processes
b. Support processes
c. Projects
2. Key business process
3. Two approaches to understand business model and key processes
a. Top-down approach
b. Bottom-up approach
4. Documenting processes
5. Business risks
6. Risk assessment model
7. Responses to risk

2
INTERNAL CONTROL
1. COSO and IIA definitions of internal control
2. Internal control roles and responsibilities
3. Limitations of internal control
4. Classification of controls
a. Based on level of control
b. Based on importance
5. Types of controls
a. Preventive
b. Detective
c. Corrective
d. Directive
e. Compensating/complementary

DOCUMENTING AND TESTING INTERNAL CONTROLS


1. Internal control questionnaire (ICQ)
2. Narrative descriptions
3. Flowcharts
4. Walk-Throughs
5. Testing of internal controls

OTHER
1. Case - Ocean County’s Procurement Audit
2. All aspects of your audit project up to this point

READINGS
(Only the readings on this list are subject to inclusion on the exam)
1. “A Glimpse of the Future,” Internal Auditor, Jun 2013, 51-55
2. “Improving Client Relations,” Internal Auditor, Oct 2009, 19-21.
3. “A Solid Understanding of Risk,” Internal Auditor, Jun 2013, 21-25.
4. “Risk Innovation,” Internal Auditor, Feb 2012, 49-52.
5. “COSO 2013,” Internal Auditor, Aug 2013, 60-65.
6. “Write Your Own Stinking Procedures,” Internal Auditor, June 2015, 69.
7. “Audit Evidence,” Internal Auditor, Feb 2009, 19-20.
8. “Becoming a Better Interviewer,” Internal Auditor, Jun 2013, 64-69.

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