Chapter 9: Internal audit

Question 1

What is internal audit?

Answer 1

• independent appraisal activity (in large firms); sep. dpt.

Question 2

How is the auditor independence monitors for internal audit?

Answer 2

• not fully indpt.
• they can retain objectivity by 1) having no involvement in Op. activity
  2) report to Audit commi or BoD

Question 3

What are the funtions of the internal audit?

Answer 3

• Monitor internal control systerm
• Monitor risk management policy
• review economy, efficiency
• review compliance of laws
• check for fraud

Question 4

Wat are the comparisons of internal audit and external audit? 
to be required
appointed 
reporting to 
reporting on
and scope of assignment

Answer 4

EA or IA
required by:
EA: Company law
IA: BoA/ Audit commitee

appointed by:
EA: shareholder/ BoD
IA: BoA/ AC

Reports to:
EA: shareholder
IA: BoD/ AC

Reporting on:
EA: if Fstat true and fair and prepared
IA: adequacy of internal cotnrols

scope of assignment
EA: unlimited to fulfil stat obligations
IA: ordered by management