Internal audit.

Question 1

What is internal audit

Answer 1

Appraisal activity ( structured process to evaluate) provided as a service to the company.

The role includes examining, evaluating and monitoring the effectiveness of internal controls.

Internal auditors should not be involved in day to day running activities!

Question 2

Diff between purpose of internal and external auditors.

Answer 2

Purpose of external auditor is to give an opinion on the financial statements regarding if they show a true and fair view.

Internal auditors purpose is to help management achieve business objectives.

Question 3

Diff in who they report to, internal v external

Answer 3

external reports to shareholders.

Internal report to audit committee if there is one, if not directors/board as a whole

Question 4

Diff in scope for internal v external

Answer 4

The scope for external auditors is governed by auditing standards e.g ISA
and companies act.

For internal, scope is determined by audit committee/ directors

Question 5

Diff in status, internal v external

Answer 5

Legal requirement for audit performed for large companies and has to be independent.

Internal-Some companies it is voluntary to have internal auditors.
If UK listed, need to have an internal audit department or regularly review the need for one.

Question 6

Diff in qualifications for internal v external

Answer 6

External has to be a member of a RSB- (need the relevant qualifications from RQB)

Internal- don’t need to hold a qualification however many do.

Question 7

Example of activities produced by an internal auditor

Answer 7

Monitor internal controls- They will monitor the processes and provide assurance the systems designed meet objectives and operate effectively.

Examine financial information- carry out tests of detail on transactions and balances like an external auditor does.

Compliance- ensure compliance with regulations

Reviews- Review economy, efficiency operations including looking at non-financial controls. Helps you ensure we are buying things at a good price etc

Special investigations- e.g into fraud

Question 8

Tasks internal don’t really do

Answer 8

Design control systems- usually done by employees.

Internals usually just monitor them.

Shouldn’t be too involved in everyday running.

Question 9

Are internal auditors employed by the company

Answer 9

Yes