Internal audit

Question 1

Define internal audit

Answer 1

An independent appraisal activity established within an organisation

Question 2

How can internal auditors retain objectivity? (2)

Answer 2

1. Having no involvement in the operational activities of the company
2. Reporting to an appropriate level of management

Question 3

What are the roles of internal audit? (6)

Answer 3

COSIER

1. Reviewing COMPLIANCE with laws and other external regulations
2. Examining OPERATING AND FINANCIAL information
3. SPECIAL INVESTIGATIONS
4. Monitoring INTERNAL CONTROL SYSTEMS
5. Reviewing the ECONOMY, EFFICIENCY, and EFFECTIVENESS of operations
6. Monitoring the overall RISK MANAGEMENT policy for effectiveness

Question 4

What requires external audit?

Answer 4

Company law

Question 5

What requires internal audit?

Answer 5

Board of directors/Audit committee

Question 6

What appoints external audit

Answer 6

Shareholders/Board of directors

Question 7

What appoints internal audit

Answer 7

Board of directors/Audit committee

Question 8

What does the external audit report to?

Answer 8

Shareholders

Question 9

What does the internal audit report to?

Answer 9

Board of directors/Audit committee

Question 10

What does the external audit report on? (3)

Answer 10

1. Whether the financial statements are true and fair
2. Whether the financial statements are properly prepared
3. Whether the directors’ report and strategic report is consistent with the financial statements

Question 11

What does the internal audit report on?

Answer 11

Adequacy of internal controls

Question 12

What is the scope of an external audit assignment?

Answer 12

Unlimited, to fulfil statutory obligations

Question 13

What is the scope of an internal audit assignment?

Answer 13

Prescribed by management