Module 6 - Internal Audit

Question 1

Internal audit function (IAF) should report to…

Answer 1

The audit committee

Or CEO if no audit committee

Question 2

Key elements of IAF?

Answer 2

Independent

Measures and evaluates objectively

Within the organisation

Integral for framework of the business controls

Service all levels

Effectiveness and efficiency - value for money

Question 3

The rule for internal audit?

Answer 3

General rule is no statutory requirement

However,

Some entities are required, either under statute or regulatory arrangements

Egm local authories and central governments obliged to make arrangements for internal audit function

Question 4

UK corporate governance code recommends that:

Answer 4

Company has an internal audit function, monitored by the audit committee to review the effectiveness

Where IAF does not exist, audit committee should consider annually if there is a need for one

Question 5

Types of internal audit

Answer 5

Financial

Systems

Management

Value for Money

Operational

Contract

Post-imp

Investigations

Inspection and quality

Compliance

Follow up

Culture

Question 6

Operational audit

Answer 6

Systematic review and evaluation of an organisation… Effectiveness and efficiency in pursuit of operating objectives.

Eg. Review of a constructions company’s compliance with Health and safety regulations

Question 7

Follow up audit

Answer 7

Conducted after an internal or external audit report has been issued

Question 8

Effective internal audits…

Answer 8

Process - programme prepared by IA manager and approved by audit committee

Role of committee - IA function overseen and reviewed by IA committee (sometimes CEO oversees in smaller companies)

Resources and competence - sufficient resources to carry out the reviews, including competent individuals with suitable qualifications or experience

Independence - IA must be independent, provide impartial and unbiased judgements, essential to proper conduct

Status and position - IA has apporpriate standing in organisation so they are respected by all staff and recommendations taken seriously

IA standards - due professional care, consistency of work internationally. Institute of IA developed international standards