Chapter 9 - Internal audit

Question 1

What is the internal audit function?

Answer 1

Appraisal activity established as a service to the entity examining internal controls

Question 2

What is the internal audit generally a feature of?

Answer 2

Large companies

Question 3

What is the objective of external audit?

Answer 3

Express an opinion on financial statements

Question 4

What is the objective of internal audit?

Answer 4

Designed to add value and improve operations

Question 5

What does the internal audit report to?

Answer 5

Board of directors/audit committee

Question 6

Who do external auditors report to?

Answer 6

Shareholders

Question 7

What are the roles of an internal audit?

Answer 7

• Monitoring internal controls
• Examine financial and operational info
• Review economy, effectiveness and efficiency of operations
• Review compliance with laws and regs
• Identify and evaluate risk

Question 8

What is the relationship between risk and internal audit function?

Answer 8

Internal audit function monitors overall risk management policy and strategies implemented

Question 9

How does the internal audit aid internal controls?

Answer 9

• Monitors overall process and provides assurance
• Must retain objectivity
• Testing
  -Ensures policies are adequate

Question 10

What 3 roles could the internal audit function take on to help the board in its management of the company and still operate effectively?

Answer 10

• Giving expert advice on technical accounting matters
• Liaising with the external auditors
• Auditing board reports not audited by the external auditors

Question 11

What 3 activities are performed by both internal and external auditors?

Answer 11

• Review of compliance with laws and regulations
• Assessment of the effectiveness of internal controls
• Carrying out tests of details on transactions and balances