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CORPORATE GOVERNANCE
Elements of Corporate
Governance
Accountability
Transparency
Regulatory Framework
Business Ethics
Administrative Structure
ACCOUNTABILITY
From amongst
director which
fulfill the following
requirements.
Role in monitoring
Role in oversight Role in oversight Role in oversight the effectiveness
of financial of the external of risk of the internal
reporting and auditor management control process and
accounting of the internal
audit.
ESSENTIAL FEATURES OF AN AUDIT
Be inadvertently misleading
Be deliberately misleading
• Solely responsibility of
Accounting management
• Independent examiner
Auditing
REGULATION OF THE AUDIT PROFESSION
Take the form of general principles, Standards may take the form of a
relying on interpretation and series of rules, limiting the flexibility
judgment by the financial statement and use of judgment allowed in their
preparers before they can implement implementation.
THEORIES OF AUDIT
Legal considerations aside, the necessity for and cost of an audit are
borne by companies because of the need of investors and lenders for
reliable information to aid their decision-making.
a) a Public Company or
Operational audits
Compliance audits
FINANCIAL STATEMENT AUDITS
IN ACCORDANCE WITH SPECIFIED CRITERIA:
• NORMALLY, THE CRITERIA ARE THE REQUIREMENTS OF THE
APPLICABLE INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRSS) AND THE COMPANIES ORDINANCE 1984.
GENERAL AUDIT:
• FOR EXAMPLE, A GENERAL AUDIT OF A BUSINESS MAY PROVIDE
SUFFICIENT FINANCIAL INFORMATION FOR A BANKER
CONSIDERING A LOAN TO THE COMPANY,
• BUT A CORPORATION CONSIDERING A MERGER WITH THAT
BUSINESS MAY ALSO WISH TO KNOW THE REPLACEMENT COST
OF FIXED ASSETS AND OTHER INFORMATION RELEVANT TO THE
DECISION. THE CORPORATION MAY USE ITS OWN AUDITORS TO
GET THE ADDITIONAL INFORMATION.
OPERATIONAL AUDITS
• PURPOSE
• TO DETERMINE WHETHER THE ENTITY IS FOLLOWING SPECIFIC
PROCEDURES, RULES, OR REGULATIONS SET DOWN BY SOME
HIGHER AUTHORITY.
• ALSO COMPLYING WITH LEGAL REQUIREMENTS.
• IN THE AUDIT OF GOVERNMENTAL UNITS SUCH AS DISTRICTS
SCHOOL, THERE IS EXTENSIVE COMPLIANCE AUDITING DUE TO
EXTENSIVE REGULATION BY HIGHER GOVERNMENT AUTHORITIES. IN
VIRTUALLY EVERY PRIVATE AND NON PROFIT ORGANIZATION, THERE
ARE PRESCRIBED POLICIES, CONTRACTUAL AGREEMENTS, AND
LEGAL REQUIREMENTS THAT MAY CALL FOR COMPLIANCE AUDITING.
• RESULTS OF COMPLIANCE AUDITS ARE TYPICALLY REPORTED TO
SOMEONE WITHIN THE ENTITY BEING AUDITED RATHER THAN TO A
BROAD SPECTRUM OF USERS.
EXAMPLES OF THE THREE TYPES
OF AUDITS
TYPES OF AUDIT EXAMPLE QUANTIFIABLE ESTABLISHED AVAILABLE
INFORMATION CRITERIA EVIDENCE
in depth examination
DISADVANTAGES OF AN AUDIT
Audit Fee
Time to providing
information to the auditor
FRAUD AUDITING
Fraud is known as
An intentional false Auditors have
representation of professional
material fact or its responsibility to
concealment with detect fraud in
the aim of making their line of work
another party act known as fraud
on this information auditing.
at his/her own
peril.
PRINCIPLES OF FRAUD AUDITING
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PRINCIPLES OF FRAUD AUDITING
The most common fraudulent schemes by lower-level employees involve
disbursements (payables, payroll, and benefit and expense claims).
Fraud incidents are not growing exponentially, but fraud losses are.
Accounting frauds are discovered more often by accident that by financial audit
purposes or design. Over 90 percent of financial frauds are discovered by
accident.
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Auditing in Public
Sector
DEFINITION OF GOVERNMENT AUDIT
According to the INTOSAI (International Organization of Supreme Audit
Institutions) Auditing Standards, the full scope of government auditing
includes regularity and performance audit.
• CERTIFICATION AUDIT
• COMPLIANCE WITH AUTHORITY AUDIT
• PERFORMANCE AUDIT
CERTIFICATION AUDIT
Objectives of certification audit
• The Financial Statements properly present, in all
material respects, the government’s financial
position, the results of its operations, its cash flows
and its expenditures and receipts by
appropriation;
• Ensure that assessed revenue is promptly collected
and deposited in government treasury and
properly classified in the Financial Statements; and
• The sums expended have been applied in all
material respects, for the purposes authorised by
Parliament and have, in all material respects, been
booked to the relevant grants and appropriations.
METHODOLOGY FOR CERTIFICATION
AUDIT
Understanding the auditee;
Evaluating results;
Reporting; and
Follow up.
COMPLIANCE WITH AUTHORITY AUDIT
Audit against the provision of funds to ascertain whether the
moneys shown as expenditure in the accounts were
authorized for the purpose for which they were spent.
• EVALUATING RESULTS;
• REPORTING; AND
• FOLLOW UP.
KEY ELEMENTS OF AN EFFECTIVE PUBLIC
SECTOR AUDIT ACTIVITY
Organizational independence
A Formal Mandate
Unrestricted Access
Sufficient Funding
Competent leadership
Objective Staff
Competent Staff
Stakeholder support