I am looking for the answer of 'internal auditing Assurance & Advisory Service Fourth Edition', chapter 13, page 53, discussion question number 6.

Thanks

DISCUSSION QUESTIONS 1. Why is it so important to "begin with the end in mind" when planning an assurance engagement? 2. COSO defines business objectives as those measurable steps the organization takes to achieve its strategy." With this definition in mind, how can an administrative, task-oriented process have strategic objectives? 3. Management tends to focus on residual risk instead of inherent risk. Why do you think this is so? Why should internal auditors consider both inherent risk and residual risk when planning an assurance engagement? For each item noted by the internal audit team: a. Describe the potential business risk(s) associat- cd with the item. b. Discuss how the internal auditors' knowledge of the risks identified might affect a subsequent audit of the materials acquisition and produc- tion processes. 7. AVF Inc, manufactures several lines of packaging equipment. The company considers product reliability and outstanding customer service to be critical to its success. The customer service department is responsible for: # Providing prospective customers with product infor- mation. - Monitoring spare parts availability. *Providing equipment operating and maintenance information to customers. Developing and delivering customer training courses. Responding to customer complaints and making service calls Handling customer warranty claims. * Maintaining good customer relations. If the internal auditor fails to identify all key process level risks, what impact might that have on the overall assurance engagement? If the internal auditor determines that certain process-level risks are key when in fact they are not, what impact might that have on the overall assurance engagement? Besides financial reporting impact, what other types of risk outcomes should be considered when assessing the impact of risks? In anticipation of an upcoming engagement, an internal audit team recently toured the company's receiving, warehousing, and production facilities to obtain a better understanding of day-to-day operations. Listed below are selected items noted by the internal audit team during the tour: a Alarge quantity of materials was sitting in a corner near the unloading docks. The recciving manager informed the audit team that the delivery trucks had already left. The materials had not yet beer counted or inspected. * One section of the warehouse contained large quan- tities of items with inventory tags from several phys- ical inventory counts. The warehouse manager told the audit team that this was the company's inventory of spare parts that it was required by law to keep on hand for specified time periods. m Hazardous chemicals are used in the inventory fin- ishing process. Waste chemicals are stored in large plastic barrels in a designated area of the factory before being shipped for disposal The company recently made a sizeable investment to upgrade its customer service department computer system. The upgrade is expected to improve opera- tional efficiency and customer satisfaction. The out- puts of the new system include management reports used to monitor performance in the areas listed above. The audit committee has asked the internal andit function to audit the operational effectiveness and efficiency of the customer service department. This engagement covers the following areas: a Security of assets, including information. Compliance with applicable laws and company policies. Reliability of financial records. Effectiveness of performing assigned responsibilities. * Valuation of the spare parts inventory. a. Discuss why each of the five areas specified by the audit committee may or may not be appro- priate for this assurance engagement. CONDUCTING THE ASSURANCE ENGAGEMENT 13-55 DISCUSSION QUESTIONS 1. Why is it so important to "begin with the end in mind" when planning an assurance engagement? 2. COSO defines business objectives as those measurable steps the organization takes to achieve its strategy." With this definition in mind, how can an administrative, task-oriented process have strategic objectives? 3. Management tends to focus on residual risk instead of inherent risk. Why do you think this is so? Why should internal auditors consider both inherent risk and residual risk when planning an assurance engagement? For each item noted by the internal audit team: a. Describe the potential business risk(s) associat- cd with the item. b. Discuss how the internal auditors' knowledge of the risks identified might affect a subsequent audit of the materials acquisition and produc- tion processes. 7. AVF Inc, manufactures several lines of packaging equipment. The company considers product reliability and outstanding customer service to be critical to its success. The customer service department is responsible for: # Providing prospective customers with product infor- mation. - Monitoring spare parts availability. *Providing equipment operating and maintenance information to customers. Developing and delivering customer training courses. Responding to customer complaints and making service calls Handling customer warranty claims. * Maintaining good customer relations. If the internal auditor fails to identify all key process level risks, what impact might that have on the overall assurance engagement? If the internal auditor determines that certain process-level risks are key when in fact they are not, what impact might that have on the overall assurance engagement? Besides financial reporting impact, what other types of risk outcomes should be considered when assessing the impact of risks? In anticipation of an upcoming engagement, an internal audit team recently toured the company's receiving, warehousing, and production facilities to obtain a better understanding of day-to-day operations. Listed below are selected items noted by the internal audit team during the tour: a Alarge quantity of materials was sitting in a corner near the unloading docks. The recciving manager informed the audit team that the delivery trucks had already left. The materials had not yet beer counted or inspected. * One section of the warehouse contained large quan- tities of items with inventory tags from several phys- ical inventory counts. The warehouse manager told the audit team that this was the company's inventory of spare parts that it was required by law to keep on hand for specified time periods. m Hazardous chemicals are used in the inventory fin- ishing process. Waste chemicals are stored in large plastic barrels in a designated area of the factory before being shipped for disposal The company recently made a sizeable investment to upgrade its customer service department computer system. The upgrade is expected to improve opera- tional efficiency and customer satisfaction. The out- puts of the new system include management reports used to monitor performance in the areas listed above. The audit committee has asked the internal andit function to audit the operational effectiveness and efficiency of the customer service department. This engagement covers the following areas: a Security of assets, including information. Compliance with applicable laws and company policies. Reliability of financial records. Effectiveness of performing assigned responsibilities. * Valuation of the spare parts inventory. a. Discuss why each of the five areas specified by the audit committee may or may not be appro- priate for this assurance engagement. CONDUCTING THE ASSURANCE ENGAGEMENT 13-55