02. Internal and External Audits

Question 1

Explain the function of an Internal Audit?

Answer 1

• monitoring and reviewing internal procedures, systems and policies
• review of business procedures and policies to ensure compliance of laws and regulations
• detection and correction of errors and deficiencies
• corrective action to achieve goals

Question 2

Who conducts an Internal Audit?

Answer 2

Accountants within the company

Question 3

Explain the function of an External Audit?

Answer 3

• protecting external users: An external audit confirms that financial reports show a ‘true and fair’ view of the financial performance and position of a company which help external users to make informed decisions about investing capital. Ensure accounting standard have been applied
• providing confidence to stakeholders in Australian capital markets: The external auditor provides an independent and objective assessment of the accuracy of the financial reports before they are provided to the public
• this promotes market confidence amongst stakeholders as the application of the accounting standards has been verified by a person/s outside the organisation
• the role of the external auditor appointed by the shareholders and reappointed at the annual general meeting (AGM)
• they report on their findings and provide recommendations for review or correction.

Question 4

Who conducts an External Audit?

Answer 4

Accountants outside the company (independent and unbias, on behalf of external users)