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Who holds primary responsibility for establishing internal controls?
Responsibility for Internal Controls:
Management holds the primary responsibility for establishing, implementing, and maintaining an organization's internal control system.
This responsibility is outlined in frameworks such as COSO's Internal Control - Integrated Framework and the GAO's Green Book.
Roles of Other Parties:
A . Accountants: While accountants may assist in designing or assessing controls, they are not primarily responsible.
B . Internal auditors: Their role is to evaluate the effectiveness of controls, not establish them.
D . Audit committee: Provides oversight but does not implement or design controls.
COSO, Internal Control - Integrated Framework.
GAO, Standards for Internal Control in the Federal Government (Green Book).
In defining the audit objectives of a performance audit, auditors should evaluate whether the audited entity has
Performance Audit Objectives:
Performance audits evaluate whether government entities are operating efficiently, effectively, and in compliance with applicable laws.
A critical aspect is assessing whether the entity has implemented corrective actions in response to prior audit findings and recommendations, as this demonstrates accountability and progress.
Explanation of Answer Choices:
A . Updated its vision and strategic mission statements: Incorrect. While strategic planning is important, it is not the primary focus of performance audit objectives.
B . Corrective actions to address prior findings and recommendations: Correct. Addressing prior findings is a key objective to ensure identified issues have been resolved.
C . Updated its financial reports' MD&A: Incorrect. MD&A (Management's Discussion and Analysis) is related to financial reporting, not performance audits.
D . Internal controls in place: Incorrect. While internal controls are reviewed, the focus here is on corrective actions to past findings.
GAO, Government Auditing Standards (Yellow Book).
GAO, Performance Auditing Guidance.
What is the most fupdamental cash control?
Cash Control Fundamentals:
The primary goal of cash controls is to safeguard assets and prevent fraud, errors, or misappropriation.
Frequent bank reconciliations ensure that recorded cash balances match actual bank balances, detecting discrepancies quickly.
Explanation of Answer Choices:
A . Segregation of duties: While critical for cash management, it is not the most fundamental cash control.
B . Use of automated systems: Helpful for efficiency but not a fundamental control.
C . Analysis of cash reports: Important, but reconciling bank accounts is more critical for detecting errors or fraud.
D . Frequent reconciliation of bank accounts: Correct. This is the most fundamental and widely recognized control for safeguarding cash.
Association of Government Accountants (AGA), Cash Management Best Practices.
Government Finance Officers Association (GFOA), Bank Reconciliation Best Practices.
Business process re-engineering typically addresses all of the following EXCEPT the
Business Process Re-Engineering (BPR):
BPR focuses on redesigning key processes to achieve dramatic improvements in efficiency, effectiveness, and performance.
It typically involves addressing technical systems, human factors, and process workflows, but it does not involve redefining the organization's mission, which is a strategic activity outside the scope of BPR.
Explanation of Answer Choices:
A . Key processes: Incorrect. Key processes are the primary focus of BPR.
B . Human environment: Incorrect. BPR often addresses human factors, such as roles and responsibilities.
C . Organizational mission: Correct. The mission is a strategic element and not typically redefined as part of process re-engineering.
D . Technical environment: Incorrect. BPR often involves rethinking technical systems and workflows.
Hammer & Champy, Reengineering the Corporation: A Manifesto for Business Revolution.
GAO, Business Process Re-Engineering for Government Efficiency.
Compliance reporting, under government auditing standards, identifies all of the following components EXCEPT
Compliance Reporting Under Government Auditing Standards (GAS):
GAS requires auditors to assess compliance with applicable laws, regulations, contracts, and grant agreements during audits.
Compliance reporting typically includes:
Identifying areas of noncompliance.
Describing the auditor's responsibility for compliance testing.
Outlining the scope of compliance testing.
Explanation of Answer Choices:
A . Areas of noncompliance: Included in compliance reporting to highlight where the entity failed to meet requirements.
B . The auditor's responsibility for tests of compliance: GAS requires auditors to clarify their role in compliance testing.
C . Review of major internal control cycles: Correct. While internal controls may be assessed, reviewing 'major internal control cycles' is not a direct component of compliance reporting.
D . The scope of the compliance testing: GAS mandates that the scope of testing be disclosed in the compliance report.
GAO, Government Auditing Standards (Yellow Book).
AICPA, Compliance Reporting Guidance for Government Audits.
