9 - Internal Audit Flashcards
What is an internal audit?
Nothing more than an appraisal activity. They look at IC of a company and see if they are effective
What is the difference between internal and external audit?
Reason:
External - Give assurance regarding the integrity of FS.
Internal - Give assurance on quality of IC’s. Ensure efficient effective and there is adequate financial reporting controls. Makes sure of compliance of laws and regulators
Reporting to:
Internal audit - made up of board of directors (those charged with governance) and audit committee.
External audit - The shareholders of the company via the auditors report. The board via the management letter.
Work relates to:
Internal - Financial reporting issues. May provide assistance to the external auditor doing tests of controls and substantive testing. Review of efficiency of operations (Economy, efficiency and effective)
External - The financial statements of the company
Relationship with the company:
Internal - Often employees so objectivity could be an issue, but can be outsourced.
External - Must always be independent.
What does the internal audit function do?
Examine financial and operating info - Accounting matters
Review of compliance with laws and regulations
Monitoring IC’s
Review of the economy, efficiency and effectiveness of operations
Evaluating significant exposures to risk and recommending where improvements can be made
Special investigations (into suspected fraud)
