Chapter 9

Question 1

what is an internal audit?

Answer 1

is an independent appraisal activity established within an organisation.
- generally a feature of larger companies
- much broader in scope
- different objectivise to an external audit

Question 2

What does the UK Corporate Governance code apply to?

Answer 2

listed companies and stresses the need for good internal control
- listed companies without an internal audit department should reconsider this annually

Question 3

what are the facts in relation to auditor indpedendence?

Answer 3

• internal audit department cannot be completely independent of management

Question 4

how can internal audit departments retain objectivity?

Answer 4

• having no involvement in operational activities
• reporting to appropriate management i.e. audit committee

Question 5

what are the 6 key roles an internal audit have?

Answer 5

• monitoring systems of internal controls
• examining financial and operational information
• special investigations i.e. fraud
• reviewing compliance with laws
• reviewing economy, efficiency and effectiveness of operations
• monitoring the overall risk management policy

Question 6

Who is an internal and external audit required by?

Answer 6

external audit= company law
internal audit= board of directors/ audit committee

Question 7

Who is an internal and external audit appointed by?

Answer 7

external audit= shareholders or board of directors
internal audit=

Question 8

who is an internal and external audit reported to?

Answer 8

external audit= shareholders
internal audit= board of directors/ audit committee

Question 9

what does an internal and external audit report on?

Answer 9

internal= adequacy of internal controls
external= Are financial statement true and fair and properly prepared. Whether directors report and strategic report is consistent with financial statements

Question 10

what is the ‘scope of the assignment’ for an internal and external audit?

Answer 10

internal= prescribed by management
external= unlimited