Accounting Q&A · Auditing · Topic 2
Practise statutory, internal, secretarial and cost audits. Try each answer before revealing it.
Worked example
A listed retailer is required by local law to have its annual accounts audited. Obtain the applicable law and reporting framework. Check who appoints the auditor and who receives the report.
Core concepts
1. What should you know about statutory audit?
An audit required by legislation. Its scope and appointment rules depend on the jurisdiction.
2. What should you know about internal audit?
Independent, risk-based assurance and advice within an organisation, typically accountable to the board.
3. What should you know about secretarial audit?
A review of prescribed governance and corporate compliance matters where the law provides for it.
4. What should you know about cost audit?
An examination of cost records and prescribed cost information where applicable.
5. What should you know about financial statement audit?
An engagement expressing an opinion on financial statements under an applicable framework.
6. What should you know about operational audit?
An examination focused on how effectively and efficiently activities operate.
7. What should you know about compliance audit?
A review against specified legal, contractual or policy criteria.
8. What should you know about public-sector performance audit?
An examination that may address economy, efficiency and effectiveness.
9. What should you know about assurance criteria?
Benchmarks against which the subject matter is assessed.
10. What should you know about engagement mandate?
The source of authority for the work, such as statute, charter or contract.
Case 1
A listed retailer is required by local law to have its annual accounts audited.
11. Which audit concept is central here?
Statutory financial statement audit.
12. What is the main objective?
An opinion on the annual financial statements.
13. What evidence or procedure would you use?
Obtain the applicable law and reporting framework.
14. What limitation should you consider?
A report on operational efficiency would address a different objective.
15. What should happen next?
Check who appoints the auditor and who receives the report.
Case 2
A board asks whether warehouse controls prevent unauthorised dispatch.
16. Which audit concept is central here?
Internal audit.
17. What is the main objective?
Assess the design and operation of dispatch controls.
18. What evidence or procedure would you use?
Compare approved orders, dispatch logs and access records.
19. What limitation should you consider?
A policy document alone does not demonstrate operation.
20. What should happen next?
Report exceptions and agree who will follow up.
Case 3
A manufacturer is subject to separate reviews of product cost records and board filing compliance.
21. Which audit concept is central here?
Cost audit and secretarial audit where prescribed.
22. What is the main objective?
Use separate criteria for costing and corporate compliance.
23. What evidence or procedure would you use?
Inspect cost sheets for one review and statutory registers for the other.
24. What limitation should you consider?
The two mandates may require different qualifications.
25. What should happen next?
Verify the relevant law and terms before accepting either engagement.
Professional standards reference. For statutory duties, confirm the rules in the relevant jurisdiction.