Q15- Principles Of Auditing (ICAN ATSWA Sept 2021 Insight)

 

             

Question 15:

Test of the extent to which rules, policies and laws are followed by an entity being audited is called   

A. Operational audit 

B. Government audit 

C. Statement of Financial Position audit 

D. Compliance audit 

E. Forensic audit   

The correct answer is (D)

Past Question Review:

There are various types of audit including the following:

1. Forensic Audit: Current practices and the increasing number of court cases involving professional accountants have necessitated that accountants who carry out audit engagement will have to give evidence in the court of law. This has led to accountants learning how to review and investigate matters and give evidence in the court. Presentation of financial information to substantiate the position in the court become necessary. 

Forensic audit is therefore the process of auditing and presenting reports in a manner that is admissible for evidence in the court of law. It often requires investigative skill and appropriate grounding in the law and presentation of evidence in the court. 

2. Operational Audit:  This focuses on a  particular activity within the establishment e.g.  audit of agricultural and Rural Development in a local government.

3. Compliance audit usually refers to an audit that ensures that an organization is following external laws, rules, and regulations or internal guidelines, controls, and policies and procedures. 

Compliance audit seeks to test the extent to which rules, policies and laws are followed by an entity bringing out the non-compliance in front of management and Government/Tax authorities.

The correct answer is (D)

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