CHAP 9: INTERNAL AUDIT Flashcards
Internal audit function
Internal audit function: An appraisal activity established or provided as
a service to the entity. Its functions include, amongst other things, examining,
evaluating and monitoring the adequacy and effectiveness of internal control.
Ai là người có thể thực hiện internal audit
- Internal audit function provided either by employees of the entity or
sourced from an external organisation to assist management in achieving
corporate objectives.
How to know corporate objective
in company mission statement and strategic plan
Ai bắt buộc phải tuân theo UK Corporate Governance Code
UK listed companies
Internal audit function
The internal audit function can assist the board in other ways as well:
* By, in effect, acting as auditors for board reports not audited by the external auditors.
* By being the experts in fields such as auditing and accounting standards and
assisting in implementation of new standards.
* By liaising with external auditors => reduce the time and therefore cost of the
external audit.
o There are limits on the extent to which internal audit work can be used,
however, the use of internal auditors to provide direct assistance to the
external auditor is prohibited in an audit conducted under ISAs (UK).
o Internal auditors can check that external auditors are reporting back to the
board everything they are required to under auditing standards.
UK Corporate Governance có bắt buộc cty có internal audit k?
Không ,The UK Corporate Governance Code chỉ highlights the importance of internal audit by stipulating that directors of companies that do not have an internal audit department should reconsider the need for one annually
Những loại công ty nào không cần có internal audit
1, company dont apply UK Corporate Governance Code
2,small and medium-sized company
Tuy nhiên các công ty này có thể apply Code voluntarily
4 điểm khác biệt giữa internal auditor và external auditor
1, Reason
- The internal audit function is an
activity designed to add value and
improve an organisation’s
operations.
- An exercise to enable auditors to express an opinion on the financial
statements.
2, Reporting to
- Internal auditors report to the board of directors, or the audit committee
- The external auditors report to the
shareholders of a company
3, Relating to
- Operations of the organisation.
- The financial statements.
4, Relationship with the company
- Internal auditors are very often employees of the organisation, although sometimes the internal audit function is outsourced
- External auditors are independent of the company and its management. They are appointed by the shareholders
Các activities của internal audit
The activities of the internal audit function usually involve:
Monitoring internal controls
Examining financial and operating information
Reviewing the economy, efficiency and effectiveness of operations
Reviewing compliance with laws, regulations and other external requirements
Conducting special investigations, for instance, into suspected fraud
Identifying and evaluating significant exposures to risk and contributing to the
improvement of risk management and control systems
Assessing the governance process in its accomplishment of objectives on
ethics and values, performance management and accountability
Internal audit functon relation to risk management
The internal audit function has a two-fold role in relation to risk management:
* Monitoring the company’s overall risk management policy to ensure it
operates effectively
* Monitoring the strategies implemented to ensure that they continue to
operate effectively
Internal audit có assist the development of system k?
Không vì the internal audit function’s key role chỉ monitoring the overall process and in providing assurance that the systems which the departments have designed meet objectives and operate effectively.
How internal audit retain tính objectivity
Internal audit function retains objectivity
not be involved in the assessment of risks and the design of the system của entity .
testing (and therefore monitoring) controls is likely to be an important part of their role.
The tests that they carry out will be on the same lines as the tests outlined in the
previous three chapters that external auditors will carry out. However, as internal auditors are focused on all the operations of the company, they are focusing on all controls, not just ones linked ultimately to the financial statements, so the scope of their testing will be far greater than that of the external auditors.
Operational audit là j. Objective của nó?
these are audit of operational processes of the organisation . They are also known as management or eficiency audits.
Objective: monitoring of management performance, ensuring company policy is adhere to
two aspects of an operational assignment:
two aspects of an operational assignment: * Ensure policies are adequate
* Ensure policies work effectively
How internal auditor ktra tính adequacy and effectiveness of internal control
Adequacy:
The internal auditor will have to review the policies of a particular department by:
* reading them
* discussing them with members of the department
Then the auditor will have to assess whether the policies are adequate, and possibly
advise the board of improvement.
Effectiveness:
The auditor will then have to examine the effectiveness of the controls by testing
them.
