Question

A certified internal auditor is the chief audit executive for a large city and is planning the engagement work schedule for the next year. The city has a number of different funds, some that are restricted in use by government grants and some that require compliance reports to the government. One of the programs for which the city has received a grant is job retraining and placement. The grant specifies certain conditions a participant in the program must meet to be eligible for the funding. The chief audit executive plans an engagement to verify that the job retraining program complies with applicable grant provisions. One of the provisions is that the city adopt a budget for the program and subsequently follow procedures to ensure that the budget is adhered to and that only allowable costs are charged to the program. In performing an engagement concerning compliance with this provision, the internal auditors should perform all of the following procedures except

A. Select a sample of expenditures to determine that the expenditures are (1) properly classified as to type, (2) appropriate to the program, and (3) designed to meet the program's objectives.
B. Determine that the budget was reviewed and approved by supervisory personnel within the granting agency.
C. Compare actual results with budgeted results and determine the reason for deviations. Determine if such deviations have been approved by appropriate officials.
D. Determine that the budget was reviewed and approved by supervisory personnel within the city.

Answer 1

Internal auditors should perform various checks to ensure compliance with the grant provisions for a job retraining program. However, verifying that the budget was reviewed and approved by the granting agency's supervisory personnel is not typically their responsibility.

Step-by-step explanation:

The question poses a scenario in which a certified internal auditor, serving as the chief audit executive for a large city, needs to plan an engagement to ensure a job retraining program, funded by a government grant, complies with the grant's provisions.

One such provision is that a budget must be adopted and followed, with only allowable costs charged to the program.

In reviewing procedures internal auditors should perform, the option that does not typically fall within the scope of an internal auditor's responsibilities is option B: Determine that the budget was reviewed and approved by supervisory personnel within the granting agency.

This task is often the responsibility of the granting agency's personnel, not the city's internal auditors. However, verifying the city's adherence to the budget (option C) and whether the expenditures conform to the program's guidelines and objectives (option A) are standard audit practices.

Moreover, confirming that the budget was approved by city officials (option D) is also an essential task for the city's internal auditors to ensure local governance processes are respected and operating effectively.