Internal Audit Flashcards
What is internal audit?
Monitoring and feedback on effectiveness of systems
Best practice
Varying need according to scale, diversity and complexity of activities; number of employees; cost/benefit considerations; and the desire of senior management to have assurance and advice on risk and control
UK Corporate Governance Code
What is the scope of the Internal Audit function?
Varied, depending on requirements of business
Assurance
Ad hoc assignments
Requirements:
- Sufficiently resourced
- Well organised (well developed work practices)
- Independent and objective – but how?
What are the limitations of IA?
Reporting System
Scope of work
Audit work
Lengths of service of internal audit staff
Appointment of chief internal auditor
Variation of standards
Why might you outsource the internal audit function?
Better value?
Local government authorities
External auditors
Advantages
Disadvantages
What are some internal audit assignment?
Value for money assignments – ‘3 Es’
Audit of IT systems
Financial audit
Operational audit
What is the internal audit of IT systems?
Reliable basis for the preparation of financial statements?
Internal controls effective in reducing risk of misstatement
Company getting VFM?
Procurement process effective?
Ongoing management/maintenance
of system is appropriate
Project auditing
What is a financial internal audit?
Financial information – examples
Reliable?
Timely?
Financial health of business – early identification of financial risk
Examples:
- Adverse currency fluctuations
- Adverse interest rate fluctuations; and
- Inflation
Focus on processes and controls to ensure effectiveness for decision-making and risk management processes
How can the work of IA be used?
Main activities of internal audit function:
Monitoring of internal control
Examination of financial and operating information
Review of operating activities
Review of compliance with laws and regulations
Risk management
Governance
External auditor solely responsible for audit opinion
Internal auditors, by their very nature as employees of the organisation, will be less objective than external practitioner
Firstly determine:
Whether work is adequate for audit purpose
Effect on nature, timing and extent of external auditor’s own procedures
Objectivity
Technical competence
Due professional care
Effective communication
Contrasts between internal and external auditors?
Planning - objectives
Evidence – appropriate to support the opinion in the report which is the outcome of the assignment
- ISA 330
Reporting
- ISAs 700, 705 and 706
What are the types of reports for IA?
Formal reports – traditional outcome
Shorter, memorandum reports –smaller scale, less depth, urgent requirements, less formal
Presentations – greater impact? Combination with report.
