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In addition, the auditor must consider the effectiveness and efficiency of using CAATs compared to using manual techniques.There are two types of CAATs: those used to study systems controls (systems-oriented techniques) and thoseused to examine data (data-oriented techniques)/would also accept Generalized Computer Controls; Application Software.You have also been supplied with the following information: 1) ARACR (Risk of Assessment Control Risk Too Low) = 5%; Tolerable Error Rate = 8%; Estimated Population Deviation Rate for Tests of Controls = 2% and you are to determine (using the table F-2 below) the Initial Sample Size for each attribute Sample Size=77B.3 Solution/ Explain the importance of independence and objectivity in internalauditing and how they are achieved.Importance of:-The standards for the practice of internal auditing require that the auditor be independent of theactivities audited and be objective in issuing an opinion on those activities (Insight & Assurance work).-Consulting engagements may enhance the auditor’s understanding of business processes orissues, which may be helpful in performing assurance engagements.How is Objectivity & Independence Achieved?-The independence and objectivity of the internal auditor are enhanced by the following:Page 6of 8
Acc653.F16.Midterm.Solutions Summarythe organizational status of the internal audit department (The chief audit executivemust report functionally to the board.)-the authority and responsibility given to internal auditors-the degree of objectivity maintained by internal auditors-Internal auditors must be objective when performing consulting engagements.-Impairments to independence or objectivity should be brought to the attention of themanagement of the engagement client.-Management must be responsible for accepting and implementing recommendations.-Internal auditors must take care to ensure that they do not inappropriately assume managementresponsibilities.-Mention of the 3 Line of Defence (from ch3/4)-From RQ4 in ch6: Objectives are what an organization strives to achieve. The three categories of objectives set forth in the COSO framework are:Operations Objectives, which pertain to effectiveness and efficiency of the entity’s operations, including operational and financial performance goals, and safeguarding assets against loss.Reporting Objectives, which pertain to internal and external financial and non-financial reporting and may encompass reliability, timeliness, transparency, or other terms as set forth by regulators, standard setters, or the entity’s policies.Compliance Objectives, which pertain to adherence to laws and regulations to which the entity is subject.-QB4RISK BASED AUDIT PLAN SOLUTIONFollowing is an outline of the issues that could be included in the report. A sample report is provided in good form after the outline.3a.Risks•Risk that the transfer of production to South America may cause problems with the local governments and ecological groups•Risk that outsource vendors may use Samson’s technology for their own production•Risk related to labour relations due to the shutdown in Canada•