Deck 14: Completing the Integrated Audit I: Business Measurement Analysis

Question 1

What are possible performance indicators that are appropriate for information technology processes?

Answer 1

Performance indicators that are appropriate for information technology processes include reliability of information, timeliness of information, and system development.

Question 2

You are an auditor performing the review of the grouping of individual accounts into line items to be reported in the financial statements. Why is this basic process necessary?

Answer 2

a. The process of testing management's compilation of financial statements is relatively straightforward but a necessary step in the audit. The auditor will re-compute the total of all accounts that comprise a line item and then check the accuracy of any rounding. This assures that the client has not misclassified accounts or introduced an erroneous or fraudulent component to the line item.
b. Sometimes clients inappropriately net accounts such as a debit balance in accounts payable or a credit balance in accounts receivable. Also, classification of current versus non-current may be important such as a Bond Payable that is becoming due in a year and is therefore a current liability or a cash equivalent like a certificate of deposit which has been and will be pledged as collateral for many years and is therefore a non-current asset. A related party receivable must be shown separately from other receivables if material.
c. Although this process seems really basic, auditors do encounter clients where this last step of the accounting process is performed manually or in a sloppy manner. Sometimes, the final aggregation of accounts and business units is accomplished with a spreadsheet that is susceptible to error due because of the manual input of a large volume of data. The transactions and accounts may be free of material error, but the final summarized results may introduce error into the financial statements.

Question 3

What are possible performance indicators that are appropriate for supply chain processes?

Answer 3

Performance indicators that are appropriate for supply chain processes include delivery performance, service performance, quality and costs.

Question 4

You are on the audit team for Proctor & Gamble, a multi-national corporation with locations in 100 countries and over 150 products. Explain the difficulties of the aggregation process for this type of client.

Question 5

What is the purpose of business measurement analysis?

Question 6

Describe the auditor's process of measuring market performance.

Question 7

What are possible performance indicators that are appropriate for financial management processes?

Question 8

Describe the trade-off and the relationship between non-financial and financial performance data?

Question 9

How and why does the auditor obtain non-financial performance data during the audit?

Question 10

What are possible performance indicators that are appropriate for human resources processes?

Question 11

After an auditor completes the strategic and business process analyses, including evaluating the financial reporting process, the next step is to aggregate all of the evidence gathered about management assertions for specific classes of transactions. What are the basic procedures that an auditor will use during the aggregation process?

Question 12

What might the auditor's process of evaluating financial performance measures reveal?

Question 13

Why is the relationship between return on assets (ROA) and return on equity (ROE) particularly important for many clients?

Question 14

How does business measurement analysis help the auditor?

Question 15

Describe the auditor's use of a balanced score card approach to business measurement analysis.

Question 16

What are possible performance indicators that are appropriate for core processes?

Question 17

What comprises the auditor's process of evaluating financial performance?

Question 18

What are possible performance indicators that are appropriate for property processes?

Question 19

Explain why testing the grouping of individual accounts into line items to be reported in the financial statements is a particularly important part of the auditor's review process.

Question 20

What is the nature of the final stages of the audit (after the auditor has collected all the evidence)?

Question 21

As the auditor for a professional services client, what issues of human resources should you consider?