Audit 2 | Internal Audit

............ is presumed to be impaired if an internal auditor provides assurance services for an activity for which the internal auditor had responsibility within the previous year.

• Dependence

• Due Professional Care

• Objectivity

• Proficiency

Which one of the following is a criteria of opportunity for improvement?

• Management system requirement is complied with current / actual practice.

• Breakdown of any system requirement.

• It can be identified as the possible area for improvement

• All options are correct.

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations.

• True

• False

The need for internal audit (IA) therefore will depend on:

• Number of employees. The greater the number of employees the greater the risk of fraud.

• Scale and diversity of activities.

• The more complex the organisation is, the greater the benefit obtained from having an IA function as there is greater risk of things going wrong.

• All options are correct.

External auditors –

• Express an opinion on the truth and fairness of the financial statements in a written report.

• Reports to shareholders.

• Audit report is publicly available.

• All options are correct.

Internal auditors -

• Improve the company’s operations by reviewing the efficiency and effectiveness of external controls.

• Reports to management only.

• Their report is not publicly available.

• All options are correct.

Key activities of the internal audit function include:

• Assessing whether the company is demonstrating best practice in corporate governance.

• Assessing the economy, efficiency and effectiveness of operating activities (value for money).

• Providing recommendations on the prevention and detection of fraud.

• All options are correct.

Internal audit may carry out ad hoc assignments, as required by management. Example include:

• Fraud investigations.

• IT systems development and performing a review of the computer environment and controls.

• Providing assurance as external auditor.

• All options are incorrect.

Limitations of internal audit include:

• There may be a familiarity threat as they will be auditing the work of long-standing colleagues and friends.

• Internal auditors may be employees of the company they are reporting on and therefore may not wish to raise issues in case they lose their job.

• Both options are correct.

• Both options are incorrect.

Internal auditors perform many different types of assignment. Common example(s) include:

• Value for cash assignments.

• Compliance audits.

• The audit of periodic financial statements.

• All options are correct.