The Afigya Sekyere District Assembly has appointed Ms Afi Kakrabah as the Internal Auditor. She was appointed by the Disctrict Chief Exceutive (DCE) after he attended a seminar at GIMPA for newly appointed DCEs where the importance of pre-auditing of all payments by Internal Auditors for expenditures incurred by all Government Ministries, Departments Municipal, and District Assemblies (MMDAs) was stressed.
Ms Kakrabah has just completed National Service at the Internal Audit Agency, holds an HND in Accounting and is a native of the same village as the DCE of Afigya Sekyere District.
Ms Kakrabah will report to the District Finance Officer.
At the first meeting after the appointment of the DCE, the District Assembly had set up its standing committees and one of them was the Audit and Finance Sub-Committee. The first meeting of the sub-committee requested Ms Kakrabah to prepare briefing notes to show her vision and approach to the Internal Audit function at the District Assembly and to discuss how she will maintain her independence as well as her knowledge and understanding of Internal Audit Practices recommended by the Institute of Internal Auditors (IIA) as in the IIA’s International Professional Practices Framework (IPPF).
You are an Auditor in Public Practice and the Auditor General of Ghana has appointed you to perform the statutory audit of the Afigya Sekyere Disctrict Assembly. The Audit and Finance Sub-Committee of the District Assembly has requested that you attend the meeting at which the Internal Auditor will brief them and help them in assessing the Internal Auditor’s briefing.
Required
(a) Comment on the matters that you will consider on the appointment of Ms Kakrabah and her reporting lines as discussed above. (5 marks)
View Solution
1. The Institute of Internal Auditors (IIA) recommends that the appointment of the Internal Auditor (IA) be done by the Board of Directors or the Audit Committee (in this case the Audit and Finance Sub-Committee of the District Assembly) acting for the Board and not by Executive Management (the DCE in this case)
2. Her Educational Qualification and level of experience appears in appropriate for the responsibility she is expected to shoulder. It appears the DCE wants someone he can easily manipulate in the position.
3. The fact that she comes from the same village as the DCE could support the point made in 2 above and suggest the position was not advertised to open it up to competition and this will make the IA believe she must return the favour done her by the DCE and she will not be able to report objectively.
4. The IIA recommends that the IA should report functionally to the Board Audit Committee and administratively to the Chief Executive, placing her both administratively and functionally under the District Finance Officer is inappropriate and hinder her independence in reporing on financial issues.
(2 marks for discussion of any of the issues to maximum of 5 marks)
(b) State the issues that you should expect Ms Kakrabah to discuss in her briefing to Audit and Finance Sub-Committee of the District Assembly. (10 marks)
View Solution
The IA will discuss the following issues from the the IIA’s International Professional Practices Framework (IPPF).
The IIA’s definition of Internal Auditing and to explain the need for ensuring the independence of the IA even though the IA is an employee by making sure the appointment of the IA is done by the Board or its Audit Committee and the IA also reports functionally (by sending his/her Internal Audit reports) to the Audit Committee and not the DCE or District Finance Office (DFO).
- The IA should also discuss objectivity as a requirement for the IA to be free from any bias.
- The IA should discuss the need for the Internal Audit function to adopt an Internal Audit Charter that is consistent with the Definition of Internal Auditing, the Code of Ethics, and the International Standards for the Practice of Internal Auditing (the Standards) of the IIA that will define the purpose, authority, and responsibility of the Internal Audit activity.
- The Charter must be in compliance with the recommendation of the IIA and approved by the Board prior to its adoption.
- The IA will discuss briefly the Code of Ethics and the International Standards for the Practice of Internal Auditing (the Standards) recommended by the IIA and their importance to the IA.
- The Internal Audit function must adopt a version of the Code of Ethics recommended by the IIA that is appropriate for the entity
- All the reports of the IA must mention that the Internal Audit assignment was performed in compliance with the Standards and any significant non-compliance must be disclosed in the report.
- The IA should mention how she personally will ensure that the Internal Audit activity at the District Assembly (DA) functions to add value to the activities of the DA and;
- ensure it achieves its objectives in a more efficient, effective and economic (3 E’s) manner and that she will comply with the Code of Ethics that will be adopted and deal fairly with all stakeholders of the DA.
(c) The IIA’s definition of Internal Auditing states, among others that:
“Internal Auditing is an independent, objective assurance and consulting activity….”
(Note your answers should include but may not be limited to information from IIA publications)
Required:
Compare and contrast an Assurance and a Consulting Audit activity. (5 marks)
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All activities an auditor performs will be either an assurance or a consulting assignment depending on the type of report that will be issued as a result of the assignment and whether or not the activity may be performed on the basis of a contingent fee (that is a fee based on the outcome or results of the assignment). The differences are:
(2 marks for each difference and 1 mark for showing presentation, table or other visual display of the differences, maximum 5 marks)