Week 6 - Key Differences Between Internal and External Audit Flashcards
(13 cards)
1
Q
What are the first 5 main key differences between internal and external audit regarding?
A
- objectives
- responsibility
- carried out by
- scope
- approach
2
Q
What are the other 4 key differences between internal and external audit regarding?
A
- legal status
- frequency
- materiality
- how paid
3
Q
Objectives
A
- internal evaluate organisation’s risk management processes and systems of control, and assess achievements of organisation’s objectives
- external provide an opinion on whether the financial statements show a true and fair view and have been prepared in accordance with accounting standards and company law
4
Q
Responsibility
A
- internal responsible to managers
- external responsible to shareholders
5
Q
Carried out by
A
- internal - in-house function carried out by employees unless outsourced
- external - practice coming in
6
Q
Scope
A
- internal - review of all aspects of organisation’s activities
- external - focus of financial aspects of organisation’s activity
7
Q
Approach
A
- internal - evaluate internal control systems to help manage risk and to achieve objectives, minimise errors and inefficiencies
external - test basis on which financial statements have been produced, reliability of systems. Verify assets and liabilities
8
Q
Legal status
A
- internal - Corporate Governance Code for listed companies and mandatory in public sector
- external - Companies Act 2006
9
Q
Frequency
A
- internal - present throughout the year
- external - report on financial accounts on annual basis
10
Q
Materiality
A
- internal - internal not concerned, only consider if controls are working or not
- external - used to manage sample sizes and conduct audit effectively
11
Q
How paid
A
- internal - payed salaries
- external - invoice
12
Q
What is the overall internal audit focus?
A
Controls and risk in company
13
Q
What is the overall external audit focus?
A
Financial statements
