2) Which of the following is not one of the major differences between financial and operational
auditing?
A) The financial audit is oriented to the past, but an operational audit concerns performance for
the future.
B) The financial audit report has widespread distribution, but the operational audit report has
limited distribution.
C) Financial audits deal with the information on the financial statements, but operational audits
are concerned with the information in the ledgers.
D) Financial audits are limited to matters that directly affect the fairness of the financial
statement presentation, but operational audits cover any aspect of efficiency and effectiveness.
3) Which of the following is not a difference between operational auditing and financial
auditing?
A) Both must be performed by a CPA.
B) Operational audit reports are usually of a restricted distribution while financial audit reports
are widely distributed.
C) Operational audits often cover nonfinancial issues while financial audits do not.
D) None of the above is a difference.
4) A typical objective of an operational audit is to determine whether an entity’s
A) internal control is adequately operating as designed.
B) financial statements present fairly the results of operations.
C) specific operating units are functioning efficiently and effectively.
D) operational information is in accordance with generally accepted government auditing
standards.
5) Discuss three major differences between operational and financial auditing.
6) Operational audits are primarily geared towards improving a company’s operational efficiency
and effectiveness.
7) For financial auditing, the audit report typically goes to many users of financial statements,
whereas operational audit reports are intended primarily for management.
26.4 Learning Objective 26-4
1) Which of the following groups could be involved in an operational audit?
A) CPA firms
B) internal auditors
C) government auditors
D) All of the above could be involved.
2) Which of the following statements regarding types of operational audits is likely incorrect?
A) A functional audit has the advantage of permitting specialization by auditors.
B) An advantage of functional auditing is its ability to evaluate interrelated functions.
C) The emphasis in an organizational audit is on how efficiently and effectively functions
interact.
D) Special operational auditing assignments arise at the request of management.
3) The two most important qualities for an operational auditor are
A) personality and appearance.
B) independence and competence.
C) competence and technical training.
D) academic background and sufficient experience.
4) Which of the following can affect the independence of operational auditors?
A)
Responsibilities
Reporting Structure
Yes
No
B)
Responsibilities
Reporting Structure
No
No
C)
Responsibilities
Reporting Structure
No
Yes
D)
Responsibilities
Reporting Structure
Yes
Yes
5) Effective internal controls are designed to help organizations achieve which of the following
objectives?
A) reliability of financial reporting
B) efficiency and effectiveness of operations
C) compliance with applicable laws and regulations
D) all of the above
6) Which of the following best describes an audit that emphasizes how efficiently and effectively
functions interact?
A) operational
B) compliance
C) financial
D) organizational
7) Which of the following is not a purpose of a program audit as performed by government
auditors?
A) determination of the extent to which the desired results established by the legislature are
being achieved
B) determination of the causes of inefficiencies in sponsored programs
C) determination of the effectiveness of organizations, programs, activities, or functions
D) determination as to whether the entity has complied with laws and regulations applicable to
the program
8) What distinguishes internal control evaluation and testing for financial and operational
auditing?
A) purpose of the work
B) scope of the work
C) both A and B
D) neither A nor B
9) ________ is the degree to which the organization’s objectives are accomplished.
A) Effectiveness
B) Efficiency
C) Goal optimization
D) Performance
10) List the three purposes of a program audit.
11) Discuss each of the three broad categories (types) of operational audits.
12) Operational auditing is the review of an organization for efficiency and effectiveness.
Discuss what is meant by the terms “effectiveness” and “efficiency.”
13) Match seven of the terms (a-o) with the descriptions/definitions provided below (1-7):
a. compliance audit
b. economy and efficiency audit
c. effectiveness
d. efficiency
e. functional audit
f. Government Auditing Standards
g. government audit
h. Institute of Internal Auditors
i. operational auditing
j. organizational audit
k. program audit
l. Single Audit Act
m. special assignment
n. IIA Practice Standards
o. Statements on Internal Auditing Standards
________ 1. the official title of the Yellow Book
________ 2. a management request for an operational audit for a specific purpose, such as
investigating the possibility of fraud in a division or making recommendations for reducing the
cost of a manufactured product
________ 3. a government audit to determine whether an entity is acquiring, protecting, and
using its resources economically and efficiently and whether the entity has complied with laws
and regulations concerning such matters
________ 4. the degree to which the organization’s objectives are accomplished
________ 5. the review of an organization for efficiency and effectiveness
________ 6. federal legislation that provides for a single coordinated audit to satisfy the audit
requirements of all federal funding agencies
________ 7. statements issued by the Internal Auditing Standards Board of the Institute of
Internal Auditors (IIA) to provide authoritative interpretation of the Institute of Internal Auditors’
Practice Standards
14) Effectiveness refers to the degree to which costs are reduced without reducing efficiency.
15) Efficiency refers to the degree to which costs are reduced without changing effectiveness.
16) Effectiveness is concerned with whether defined goals are achieved, whereas efficiency is
concerned with whether the goals are achieved with a minimum use of resources.
17) Operational audits may be performed by internal auditors and government auditors, but not
by external auditors.
18) The two most important qualities for an operational auditor to possess are independence and
competence.
19) Auditors can insist that the changes that they recommend as the result of an operational audit
be implemented by the company.
20) Operational audits are often categorized as functional, organizational, or special assignments.
21) One disadvantage of functional auditing is the failure to evaluate interrelated functions.
26.5 Learning Objective 26-5
1) Which of the following is not one of the three phases in an operational audit?
A) planning
B) training and supervising employees
C) evidence accumulation and evaluation
D) reporting and follow-up
2) When performing an operational audit, the internal audit team must first determine that
A) a financial audit has been performed by an independent auditor.
B) a financial audit has been performed by an internal auditor.
C) a review was performed by either an independent or an internal auditor.
D) specific criteria are developed to define effectiveness.
3) As compared to a financial audit, an operational audit:
A)
Requires the auditors to
spend more time with the
interested parties
Makes staffing more
complicated
Yes
Yes
B)
Requires the auditors to
spend more time with the
interested parties
Makes staffing more
complicated
No
No
C)
Requires the auditors to
spend more time with the
interested parties
Makes staffing more
complicated
Yes
No
D)
Requires the auditors to
spend more time with the
interested parties
Makes staffing more
complicated
No
Yes
4) Discuss each of the three phases of an operational audit.
5) Benchmarking is one source of evaluation criteria for completing an operational audit.
6) Operational auditors must accumulate sufficient appropriate evidence to provide a basis for a
conclusion about the objectives being tested.
7) An operational auditor may use “engineered standards” as an evaluation criterion.