Example and practice question: Developing audit objective and audit procedure
on “Effectiveness”
Question
Frequency44 is a radio station, broadcasting throughout Africa on a daily basis.
You are responsible for performing an operational audit on the different departments
within Frequency44. The two departments that will be included in the operational audit
will be:
• Technical department – responsible for procuring all the required electronic
equipment.
• Marketing department – mainly responsible for all the advertising rights.
The management team of Frequency44 is recently decided that all the electronic
equipment should either be upgraded or replaced, to ensure that Frequency44 is
equipped with the latest technology available.
The technical manager explained that the technical department was only recently
established. Previously the procurement of equipment was the responsibility of the
finance department, but due to the tremendous growth experienced by Frequency44
management decided to create a technical department. All new equipment are
purchased and approved by the technical department.
You and a team of three auditors will perform the first operational audit on the technical
department. You will be responsible for finalising and maintaining the operational audit
budget for the project and should determine whether the department is functioning
economical, effectively and efficiently.
The chief audit executive (CAE) has requested you to investigate the economical
procurement and efficient utilisation of the technical equipment within the department.
You are in the process of obtaining additional information on the procedures followed
and the processes employed. During this exercise you discover the following:
• All equipment procured are not being used to capacity.
• Two new staff members were appointed to operate the new equipment and
there is still two vacant positions.
• Quite a few tasks are being duplicated within the process.
The CAE further requested that after the completion of the performance audit, if you
as the internal auditor can assist with the assessment that management’s policies and
procedures are adhered to. You explained to the CAE that this will not form part of the
performance audit but will be classified as assurance services
Required
Identify four (4) audit objectives and for each objective describe an audit procedure
that may be carried out to determine the effectiveness of the technical department.
Please answer in table format.
Audit objective (1½ mark each) Audit procedure (1½ marks each
on “Effectiveness”
Question
Frequency44 is a radio station, broadcasting throughout Africa on a daily basis.
You are responsible for performing an operational audit on the different departments
within Frequency44. The two departments that will be included in the operational audit
will be:
• Technical department – responsible for procuring all the required electronic
equipment.
• Marketing department – mainly responsible for all the advertising rights.
The management team of Frequency44 is recently decided that all the electronic
equipment should either be upgraded or replaced, to ensure that Frequency44 is
equipped with the latest technology available.
The technical manager explained that the technical department was only recently
established. Previously the procurement of equipment was the responsibility of the
finance department, but due to the tremendous growth experienced by Frequency44
management decided to create a technical department. All new equipment are
purchased and approved by the technical department.
You and a team of three auditors will perform the first operational audit on the technical
department. You will be responsible for finalising and maintaining the operational audit
budget for the project and should determine whether the department is functioning
economical, effectively and efficiently.
The chief audit executive (CAE) has requested you to investigate the economical
procurement and efficient utilisation of the technical equipment within the department.
You are in the process of obtaining additional information on the procedures followed
and the processes employed. During this exercise you discover the following:
• All equipment procured are not being used to capacity.
• Two new staff members were appointed to operate the new equipment and
there is still two vacant positions.
• Quite a few tasks are being duplicated within the process.
The CAE further requested that after the completion of the performance audit, if you
as the internal auditor can assist with the assessment that management’s policies and
procedures are adhered to. You explained to the CAE that this will not form part of the
performance audit but will be classified as assurance services
Required
Identify four (4) audit objectives and for each objective describe an audit procedure
that may be carried out to determine the effectiveness of the technical department.
Please answer in table format.
Audit objective (1½ mark each) Audit procedure (1½ marks each
