Module 6 Internal Audit

Question 1

What are the differences between internal auditors and external auditors?

Answer 1

Internal auditors reporting lines are within the organisation: external auditors report to shareholders

Internal auditors normally audit internal subject matters: external auditors report publically on the published financial statements

Question 2

What is internal audit?

Answer 2

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisations operations

Question 3

What are the key elements of an internal audit function? IM WISE

Answer 3

• Independent from day to day operations of the business
• Measures and evaluates objectivly
• Within the organisation
• Integral part of the framework of business controls
• Service to all levels of the organisation
• Effectiveness as well as the efficiency of operations

Question 4

Do internal auditors need the same qualification as external auditors?

Answer 4

No, although internal auditors can join the Chartered Institute of internal auditors

Question 5

Who does the internal audit team report to?

Answer 5

The audit commitee otherwise it is the CEO

Question 6

Is Internal audit a statutory requirement?

Answer 6

No, although some entities are required to have an internal audit function, common in public sector bodies

Question 7

Why does businesses choose to have internal audit?

Answer 7

To gain assurance that the management and control of the organisation is robust

Question 8

What are the different types of internal audit?

Answer 8

Financial audit - checks financial statements

Systems audit - review the systems that regulates and controls its activities

Management audit - evaluates and appraises the processes and policies management of the organisation

Value for money audit

Contract Audit - review high value and high risk contracts

Operational audit - systematic review and evaluation of an organisation

Post implementation review - objective appraisal of the success or otherwise of a business initiative

Investigatins - internal or external fraud, operational losses, breaches of security or concerns towards management

Inspection and quality control

Compliance Audit - review adherence to particular laws and regulations

Follow up audit - audits conducted after an internal or external audit report has been issued

Culture Audit

Question 9

What makes an internal audit effective? PARISS

Answer 9

• Internal audit process
• The role of the audit committee
• Resource and competence
• Independence
• Position and status of internal audit
• Internal auditing standards

Question 10

How can an organistion ensure independence of the IAF?

Answer 10

• IAF report directly to the audit committee
• Internal audit plan approved by the audit committee
• Audit committee appoint the internal audit manager
• Remunerating internal audit staff to support independence
• Internal audit staff are not invovled in operational areas