Question 1

Peer reviews of public sector audit offices are normally directed by:
A) the Prime Minister/Premier.
B) the Treasurer/Minister for Finance.
C) public accounts committees.
D) specific legislative requirements.

Accepted Answer

Peer reviews of public sector audit offices are directed by specific legislative requirements. This is because the legislative requirements provide the legal framework and guidelines for conducting audits which ensures the independence of audit offices and helps maintain public accountability.

Question 2

In a compliance audit, which of the following matters is the auditor primarily concerned about?
A) Whether the financial report is fairly presented in accordance with the identified financial reporting framework.
B) Whether the entity has achieved its stated objectives.
C) Whether the entity has followed the relevant requirements applicable to it.
D) Whether the entity has operated in the most economic and efficient manner.

Accepted Answer

In a compliance audit, the auditor's primary concern is whether the entity has followed the relevant requirements applicable to it, such as laws, regulations, contracts or internal policies. The focus is not on the presentation of financial information or achievement of objectives, or operability in a specific manner.

Question 3

Public sector entities are required to prepare financial reports based on:
A) cash accounting.
B) accrual accounting.
C) fund accounting.
D) All of the given answers are correct.

Accepted Answer

Public sector entities are required to prepare financial reports based on accrual accounting. This method of accounting matches revenues and expenses when they are incurred, regardless of when the cash is received or paid out. This provides a more accurate picture of the entity's financial condition and performance. Cash accounting and fund accounting are also used by public sector entities, but accrual accounting is the primary method of financial reporting.

Question 4

Governmental auditing often extends beyond examinations leading to the expression of an opinion on the fairness of financial presentation and includes audits of efficiency and effectiveness, and:
A) internal control.
B) evaluation.
C) accuracy.
D) compliance.

Accepted Answer

Governmental auditing includes audits of compliance to ensure that the organization is following laws, regulations, and policies that are relevant to their operations. Efficiency and effectiveness audits evaluate whether resources are being used appropriately and achieving the intended results. Internal control audits assess the adequacy of the system of internal controls put in place to safeguard assets, ensure accurate financial reporting, and compliance with laws and regulations. Accuracy audits focus on the correctness and completeness of financial information or other data that the organization generates. However, the question asks for the extension of audits, and compliance is the most fitting option as it often goes beyond financial reporting to check adherence to various applicable laws and regulations.

Question 5

It is not a primary purpose of a performance audit to provide:
A) a means of assurance that internal controls are functioning as planned.
B) a measure of management performance in meeting organisation goals.
C) the results of internal examinations of financial and accounting matters to a company's top-level management.
D) an aid to the external auditor who is conducting the examination of the financial report.

Accepted Answer

Performance audits focus on assessing the efficiency, effectiveness, and economy of operations, rather than aiding external auditors in examining financial reports.

Question 6

Government activities may be carried out through:
A) government departments.
B) statutory authorities.
C) companies.
D) All of the given answers are correct.

Accepted Answer

All of the given choices are correct. Government activities may be carried out through government departments, statutory authorities, and companies. The choice of the specific type of entity used will depend on the nature and purpose of the activity to be carried out.

Question 7

Which of the following is an example of improved effectiveness?
A) Greater outputs from the same inputs.
B) Rationalisation of facilities.
C) Introduction of charges where none previously existed.
D) An increase in the percentage of streets rated as having a satisfactory level of cleanliness and appearance in terms of a city's street maintenance program.

Accepted Answer

An increase in the percentage of streets rated as having a satisfactory level of cleanliness and appearance in terms of a city's street maintenance program demonstrates improved effectiveness as it shows that the program is achieving its intended goal of maintaining the cleanliness and appearance of streets.

Question 8

What is the main concern of performance auditing?
A) Compliance with relevant laws and regulations.
B) Probity.
C) Financial report attest auditing.
D) Efficiency, economy and effectiveness.

Accepted Answer

The main concern of performance auditing is to evaluate whether the organization being audited is operating with efficiency, economy, and effectiveness. It focuses on assessing how well resources are being utilized to accomplish goals and objectives, and whether there is room for improvement in the performance of the organization. Compliance with laws and regulations and probity (integrity and ethical behavior) are important considerations in any type of auditing, but they are not the primary focus of performance auditing. Financial report attest auditing is a separate type of auditing that focuses specifically on the accuracy and completeness of financial statements.

Question 9

The proposed annual expenditures of the Commonwealth Government are authorised by:
A) the Auditor-General.
B) the Treasurer.
C) the Department of Finance.
D) the Parliament.

Accepted Answer

The proposed annual expenditures of the Commonwealth Government are authorised by the Parliament through the Appropriation Bills. Therefore, option D - the Parliament - is the best choice. The other options are not responsible for authorizing the government's proposed annual expenditures. The Auditor-General is responsible for auditing the government's financial statements, the Treasurer is responsible for managing the government's finances, and the Department of Finance assists the Treasurer in performing their duties.

Question 10

Which of the following statements best describes the term 'outcomes' in a performance audit?
A) Number of units produced.
B) Service provided by a particular government program.
C) Consequences for the community of the government program.
D) Economy and efficiency of resources used in achieving outputs.

Accepted Answer

Outcomes refer to the consequences or impacts of a government program or activity on the community. It assesses the success or effectiveness of the program in achieving its intended goals and impact on the community. Option A, B, and D refer to outputs, services, or efficiency of resources used in achieving the outputs, which are not the same as outcomes.

Question 11

Which of the following statements best describes the term 'efficiency'?
A) A reduction in costs through better contracting.
B) Clarifying objectives and policies.
C) Greater outputs from the inputs.
D) Rationalisation of facilities.

Accepted Answer

Efficiency refers to achieving greater outputs from the inputs. It means producing more or achieving better results with less effort, time, or cost. The other options may also contribute to efficiency, but they do not fully capture the concept.

Question 12

A determination of cost savings is most likely to be an objective of a:
A) regularity audit.
B) compliance audit.
C) performance audit.
D) financial audit.

Accepted Answer

A performance audit focuses on evaluating the efficiency and effectiveness of an organization's operations and can include determining cost savings. The other types of audits listed (regularity, compliance, and financial) do not necessarily have the objective of identifying cost savings.

Question 13

The Auditor-General is appointed by:
A) the Governor-General.
B) the Parliament.
C) the Public Service Board.
D) the Minister of Finance

Accepted Answer

The Auditor-General is appointed by the Governor-General, acting on the advice of the Prime Minister or the executive government. This ensures the independence of the Auditor-General from the entities they audit.

Question 14

Why should the public sector performance auditor be concerned with avoiding commenting on government policy?
A) Any comment will undermine the public's confidence in the government of the day.
B) Government policy does not affect the performance of the entity.
C) The merits of government policy are matters for political debate and for decision by the executive government.
D) A risk may arise in that the official opposition may use the audit report to criticise the government.

Accepted Answer

The public sector performance auditor should not comment on government policy because the merits of government policy are matters for political debate and for decision by the executive government. The auditor's role is to provide an objective assessment of the entity's performance based on established standards, not to engage in political disputes or influence policy decisions. Commenting on government policy would be outside the scope of the auditor's responsibilities and could compromise their independence and integrity.

Question 15

What problem arises if the relationship between cause and effect is not determined in a performance audit?
A) The impact on the financial report cannot be determined.
B) The audit cannot proceed.
C) The criteria cannot be established.
D) A recommendation cannot be made to address the cause of the problem.

Accepted Answer

If the relationship between cause and effect is not determined in a performance audit, a recommendation cannot be made to address the cause of the problem. In other words, without understanding the cause and effect, it's not possible to provide effective recommendations to improve performance. This could result in the audit being ineffective and the organization continuing to experience the same problems. The impact on the financial report and the establishment of criteria are important, but they are not directly related to the problem-solving aspect of the audit.

Question 16

A typical objective of a performance audit is for the auditor to:
A) determine whether the financial report presents the entity's operations fairly.
B) evaluate the feasibility of attaining the entity's operational objectives.
C) make recommendations for improving performance.
D) report on the entity's relative success in attaining profit maximisation.

Accepted Answer

The typical objective of a performance audit is to make recommendations for improving performance, which is accomplished through evaluating the entity's operations and identifying areas for improvement. Options A and D deal with financial reporting and profit maximization, which are not the primary focus of a performance audit. Option B is closer to the objective of a feasibility study, but still does not capture the main purpose of a performance audit, which is to identify areas for improvement.

Question 17

Which of the following can be considered an example of a performance indicator for effectiveness?
A) A reduction in the number and severity of injuries, resulting from a road safety program.
B) The number of patients treated in a health clinic.
C) A decline in caseloads for social workers.
D) The costs of a job training program for long-term unemployed, per person placed in permanent employment.

Accepted Answer

A reduction in the number and severity of injuries resulting from a road safety program is a clear example of a performance indicator for effectiveness, as it measures the program's success in achieving its goal of improving road safety. This indicator is directly related to the desired outcome of the program and can be used to evaluate its overall effectiveness.

B, C, and D are not examples of performance indicators for effectiveness. The number of patients treated in a health clinic (B) is a measure of efficiency, not effectiveness. A decline in caseloads for social workers (C) may be an indicator of decreased demand for services but does not measure the effectiveness of the social workers' interventions. The costs of a job training program per person placed in permanent employment (D) is a measure of cost-effectiveness, not effectiveness itself.

Question 18

Governmental auditing includes:
A) financial report auditing.
B) performance auditing.
C) compliance auditing.
D) All of the given answers are correct.

Accepted Answer

Governmental auditing includes financial report auditing, performance auditing, and compliance auditing. Therefore, all of the given answers are correct.

Question 19

Why is it important to establish performance audit criteria?
A) They are a basis for communication with management.
B) They indicate the scope of the performance audit.
C) They are a basis for developing audit programs and questionnaires.
D) All of the given answers are correct.

Accepted Answer

Establishing performance audit criteria is important for a range of reasons, including that they provide a means for communicating with management, indicating the scope of the audit, and developing audit programs and questionnaires. Therefore, all of the given answers are correct.

Question 20

In reporting performance audit findings, why does an auditor evaluate evidence against criteria?
A) To ensure reasonable criteria have been established.
B) To develop conclusions relative to the audit objectives.
C) To develop the audit scope.
D) To determine risk.

Accepted Answer

Evaluating evidence against criteria allows the auditor to develop conclusions relative to the audit objectives. This involves comparing the evidence collected to predetermined criteria or expectations, in order to determine whether there are any discrepancies or areas of improvement. This process enables the auditor to provide objective and reliable findings, which can be used to develop recommendations for addressing any identified issues.

Quiz 15: Auditing and Assurance Services in the Public Sector

Peer reviews of public sector audit offices are normally directed by:

In a compliance audit, which of the following matters is the auditor primarily concerned about?

Public sector entities are required to prepare financial reports based on:

Governmental auditing often extends beyond examinations leading to the expression of an opinion on the fairness of financial presentation and includes audits of efficiency and effectiveness, and:

It is not a primary purpose of a performance audit to provide:

Government activities may be carried out through:

Which of the following is an example of improved effectiveness?

What is the main concern of performance auditing?

The proposed annual expenditures of the Commonwealth Government are authorised by:

Which of the following statements best describes the term 'outcomes' in a performance audit?

Which of the following statements best describes the term 'efficiency'?

A determination of cost savings is most likely to be an objective of a:

The Auditor-General is appointed by:

Why should the public sector performance auditor be concerned with avoiding commenting on government policy?

What problem arises if the relationship between cause and effect is not determined in a performance audit?

A typical objective of a performance audit is for the auditor to:

Which of the following can be considered an example of a performance indicator for effectiveness?

Governmental auditing includes:

Why is it important to establish performance audit criteria?

In reporting performance audit findings, why does an auditor evaluate evidence against criteria?