QUESTIONS AND ANSWERS ON AQMF (PC-22)

QUESTIONS AND ANSWERS ON
AUDIT QUALITY MANAGEMENT FRAMEWORK

Q. 1: Select the correct answer

1. The Comptroller and Auditor General of India (C&AG) has approved an Audit

Quality Management Framework (AQMF) for:

(a) Improvement in audit quality

(b) Indian Audit and Accounts Department

(c) Assurance of quality audit output

(d) Proper implementation of CAG’s DPC Act

2. This Framework has been prepared in the backdrop of the Audit Quality

Assurance Guideline brought out by:

(a) ASOSAI

(b) All SAIs

(c) INTOSAI

(d) None of the above

3. The Task Force felt that adoption guidelines in their totality may necessitate jettisoning the entire body of standards, manuals & guidelines and other similar technical guidance literature in which most of the key elements of:

(a) KIE Framework

(b) QME Framework

(c) Umbrella framework

(d) None of the above

4. Task Force, while drafting AQMF, recommended to adopt existing KIEs. Here KIE stands for:

(a) Key Instruments to be examined

(b) Key Instruments to be employed

(c)Key Instruments to be executed

(d) All of the above

5. Which one from the following is not a part of KIEs?

(a) C&AG’s (DPC) Act

(b) Auditing Standards and Performance Auditing Guidelines

(c) Audit Quality Management Framework 

(d) Internal Control Evaluation Manual

6. The Framework identifies the policies, practices and guidance on the five broad parameters of the quality management processes, viz.

(a) Leadership and direction & human resources management

(b) Clients and stakeholder relations & audit management

(c) Continuous improvement.

(d) All of the above

7. During the course of implementation of the instructions contained in subsequent paragraphs, a clear hierarchy of audit related literature has been established as Level I, Level-II etc. Please give the correct match:

A	Level-I	A	Standards and generic manuals/guidelines that have been brought out by Audit Wing and have universal application.
B	Level-II	B	Supplementary manuals of instructions and guidance and practice notes that each Functional Wing
C	Level-III	C	The local manuals/circulars/orders
D	Level-IV	D	The Constitutional provisions and the C&AG’s (DPC) Act and Regulations

(a) A-D, B-C, C-A, D-B

(b) A-C, B-D, C-B, D-A

(c) A-C, B-A, C-B, D-D.

(d) A-D, B-A, C-B, D-C

8. The draft AQMF was effective from…..

 (a) 1^st July 2009

(b) 1^st January 2009

 (c) 1^st September 2010

(d) 1^st July 2010

9. The broad objectives of quality assurance are to ensure that:

(a) Controls are in place at all stages of the audit cycle including planning, execution, reporting and follow up

(b) Controls are properly implemented

(c)In built mechanism to constantly review and update the controls exists.

(d) All of the above

10.In Public Audit, quality management involves a system composed of: (Please see which one is not relevant)

(a) Audit Organization

(b) Audit Planning

(c)The auditors

(d) Audit Process

11. True or False?

The basic principal behind the audit quality management is continuous improvement in the quality of audit by focusing on the needs of clients and stakeholders

Ans: True

12.Audit Planning broadly comprises of

(a) Risk Assessment

(b) Selection of Units

(c)Assignment Planning

(d) All of the above

13. Standard formats and checklists should be developed and used to ensure uniformity and focus in which of the following audit approaches. Select correct option.

1.      Preliminary list of documents to be seen;

2.      Suggested issues for examination;

3.      Checks to be exercised at different levels; and

4.      Format for reporting results.

(a) 1, 3 &4 (b) 1& 3 (c) 2, 3 & 4 (d) All of the above

14. it should be seen whether the planning process was: Select correct option.

1.      based on sound judgments;

2.      Comprehensive;

3.      provided for suitably experienced staff for audit and supervision;

4.      Timely; and

5.      Appropriately documented.

(a) 1, 3 &4 (b) 1& 3 (c) 2, 3 & 4 (d) All of the above

16. The audit execution process broadly includes the following: Select correct option.

1.      Entry conference;

2.      Determination of the audit approach;

3.      developing and executing audit tests through evidence gathering, evaluating evidence, developing audit opinions;

4.      developing findings and ensuring that replies/responses from the management are received;

5.      developing recommendations; and

6.      Exit conference.

(a) 1, 2, 3 &4 (b) 1,2, & 3 (c) 2, 3 4 & 5(d) All of the above

17. Match the columns

A	The audit process begins with a restatement of our understanding of the entity	A	The audit tests are the key link between the audit objectives and criteria and the conduct of an audit leading to credible and objective findings.
B	Audit test programmes: Testing of the audit objectives	B	Complete and detailed working papers must be maintained in respect of the audit, appropriately cross referenced and supported by evidence.
C	Developing audit findings:	C	Supervision could involve assigning of responsibilities, providing guidance, reviewing the work, staying informed about and addressing significant problems, and obtaining periodic feedback.
D	Documentation and maintenance of working papers:	D	This requires domain knowledge of the entity, the control framework within which the entity operates, and the external environment.
E	Supervision of audit:	E	Audit findings/observations are based on the analysis of information or evidence drawn from the sample for audit, with computer assisted audit techniques and tools (CAATTS) applied wherever possible.
F	Monitoring & Review of audit operations:	F	Before the audit is completed, management/auditee responses to the audit findings and observations if any,  should be obtained from auditee.
G	Exit Conference:	G	It would enable anticipation of problems and early intervention with appropriate action and solutions. Improved electronic and online monitoring of theprogress of audit and providing guidance

a.      A-D, B-A, C-E, D-B, E-C, F-G, G-F

b.      A-D, B-E, C-A, D-B, E-C, F-G, G-F

c.       A-D, B-A, C-E, D-B, E-G, F-C, G-F

d.      A-F, B-A, C-E, D-B, E-C, F-G, G-A

18. Which one of the following is not a part of audit process?

a)      The audit process begins with a restatement of our understanding of the entity

b)      Audit test programmes: Testing of the audit objectives

c)       Developing audit findings & Documentation and maintenance of working papers:

d)     None of the above

19. Which one of the following is not a part of audit product?

a)    Appraisals

b)    Comments

c)    Opinions

d)     None of the above

20. Match the columns

A	Reporting for financial and compliance audits:	A	These are primarily concerned with compliance with laws, regulations and procedures and with probity and propriety of decisions, the reporting and communicating the audit results should be in accordance with the policies, guidelines and instructions of the Department.
B	Reporting for performance audit:	B	It is wide-ranging in nature and is more open to judgment and interpretation. For performance audits, the report should be on the economy and efficiency with which resources are used, and the effectiveness with which objectives are achieved.
C	Characteristics of a good audit report:	C	The audit report should be complete, accurate, objective, convincing, clear and concise. It should contain the audit objectives, scope and methodology and the results of audit which include findings and conclusions
D	Review of audit findings before finalization of reports:	D	All audit findings should be reviewed at a suitably senior level before audit opinions or reports are finalized. The nature and extent of the review would depend on several factors such as the significance of the work, the risk perception of the auditee, and experience levels of the audit personnel be reviewed at a suitably senior level before audit opinions or reports are finalised. The nature and extent of the review would depend on several factors such as the significance of the work, the risk perception of the auditee, and experience levels of the audit personnel
E	Developing audit recommendations	E	All performance audits should conclude with well thought-out recommendations. For developing recommendations, audit should identify the underlying cause(s) of a finding, as this forms the basis for the recommendations.
F	Follow up:	F	Follow-up of the audit output improves the quality and effectiveness of audit by assessing the response of clients and stakeholders to the work performed by audit in terms of results and impact.

a.      A-D, B-A, C-F, D-B,E-C, F-E,

b.       A-D, B-E, C-A, D-B,E-C, F-F,

c.       A-D, B-A, C-E, D-B,E-F, F-C,

d.      A-A, B-B, C-C, D-D,E-E, F-F,

21. Fill in the blanks with correct choice

Post-audit technical inspections, internal audit and peer review are other mechanisms of _______  __________ as to whether quality procedures are functioning effectively, and of identification of steps needed to further improve the quality of audit.

a)      Continuous improvement

b)      Quality assurance

c)      self-assessment

d)      Lesson learning

22. A system of self-evaluation whereby audit teams mayreview audit practices through post-audit discussions is an important quality assuranceprocess. The purpose of establishing continuous lessons learnt process is to help ensureconsistent quality in audits and improve the department’s processes on a continuing basis.Single out the parameter which is not relevant to the above issues.

a)    Whether the resources assigned to the audit were reasonable

b)    Whether findings/conclusions/recommendations got an appropriate response

c)    Reasons for less successful audits

d)    None of the above

23. Tone at the top and vision, mission, Core Values and Auditing standards are the Quality Management Elements ( QMEs) which pertains to following parameter:-

a.    Human resourse Development

b.    Audit Management

c.    Leadership and Direction

d.    Continuous Improvements