Chapter 21 LS

Many companies established internal audit departments to address the need for an effective system of internal control required by this act in 1977.

Foreign Corrupt Practices Act

Congress and various regulators have adopted __________ auditing requirements for a wide variety of businesses and governmental and nonprofit organizations.

compliance

Society's concerns about ensuring all types of organizations follow laws and regulations has led to __________ auditing becoming an important part of the work of both internal and external auditors.

compliance

The GAO employs auditors to perform operational audits of __________ programs where the effectiveness of the programs cannot be evaluated in terms of profits.

governmental

The Report of the National Commission on Fraudulent Financial Reporting suggested that public companies establish an internal auditing function and ensure its objectivity by having the director of internal audit report to the ______.

Audit Committee

To assist management with their assertion about the effectiveness of internal control required by the Sarbanes-Oxley Act, internal auditors frequently ______.

document and test controls over financial reporting

An operational audit focuses on the efficiency,__________ , and __________ of operations.

effectiveness economy

In compliance attestation engagements, the CPA's report provides assurance on ______.

either management's assertions or directly on compliance

In addition to monitoring financial controls, internal auditors also ______.

evaluate and test operational controls

The final stage in the operational audit process is for auditors to __________ - __________ on the unit or activity to ensure any deficiencies disclosed in the audit report are satisfactorily handled.

follow up

It is the responsibility of ______ to ensure an organization is in compliance with the requirements of the Sarbanes-Oxley Act.

management

Internal auditors perform operational audits for the benefit of ______.

managers

When compared to typical business enterprises, governmental organizations are subject to ______ laws and regulations that affect their financial statements.

many more

Internal auditing is defined by the IIA as an independent, __________ assurance and consulting activity designed to add value and improve an organization's operations.

objective

A comprehensive examination of a unit or a complete organization to evaluate its systems, controls, or performance, as measured by management's objectives is referred to by the term

operational

The three parts of the Certified Internal Auditor (CIA) exam are: Essentials of Internal Auditing;__________ of Internal Auditing; and __________ Knowledge for Internal Auditing.

practice business

After familiarizing themselves with the unit being audited, internal auditors summarize critical aspects and potential problem areas in a ______.

preliminary survey

Broker-dealers are required to file annual compliance reports concerning their internal control over compliance with SEC requirements referred to as

responsibility rules.

An organization that receives government funds may be subject to compliance requirements with a variety of laws and regulations because of ______.

restrictions on how the funds may be spent

The International Standards for the Professional Practice of Internal Auditing are issued by the ______.

IIA

Which of the following are categories of IIA standards?

Performance standards Attribute standards

Which of the following is true of internal auditors' role in documenting and testing controls?

- The role must be compatible with the overall mission and charter of the internal audit function. - The role should not be seen as impairing the internal auditors' objectivity.

In a compliance attestation engagement, CPAs can provide assurance on ______.

- compliance with specified requirements directly - management's assertion of compliance

An individual who has passed an examination administered by the IIA and has met the necessary experience requirements is known as a(n) ______.

Certified Internal Auditor (CIA)

Auditors have a responsibility to design all audits to obtain reasonable assurance of detecting material misstatements resulting from violations of laws and regulations that have what kind of effect on amounts in the financial statements?

Direct and material effect