Internal Audit

Question 1

reasons we may need an internal audit function?

Answer 1

• size/number of employees
• complexity of business
• costs of poor internal controls
• attitude of management

Question 2

roles of internal audit:

Answer 2

• monitoring systems of internal control
• examining financial and operating information
• special investigations eg. into suspected fraud
• reviewing compliance with laws and other external regulation
• reviewing economy, efficiency and effectiveness of operations
• monitoring overall risk management policy for effectiveness

Question 3

Is having an internal audit function a requirement of the UK Corporate Governance Code for listed companies?

Answer 3

No.

The UK Corporate Governance Code does not require listed companies to have an internal audit function per se, but requires companies to consider the need for one annually, in order to maintain an adequate system of internal controls.

Question 4

Can internal audit be seen as an internal control in a company?

Answer 4

Yes

Question 5

Should internal auditors get involved in operational matters?

Answer 5

No

Question 6

To which parties would the internal auditor report?

Answer 6

The board of directors

The audit committee

Question 7

Which activities would typically be performed by both the internal and external auditor?

Answer 7

Review of compliance with laws and regulations

Assessment of the effectiveness of internal controls

Carrying out tests of details on transactions and balances

Question 8

What are two features of internal auditors that are not features of external auditors?

Answer 8

Their work is focused on the operations of the entire business.

The role can be carried out by employees of the entity

Question 9

Define internal audit.

Answer 9

An appraisal activity established or provided as a service to the entity. Its functions include, amongst other things, examining, evaluating and monitoring the adequacy and effectiveness of internal control.