Internal audit Flashcards
Define internal audit
An independent appraisal activity established within an organisation
How can internal auditors retain objectivity? (2)
- Having no involvement in the operational activities of the company
- Reporting to an appropriate level of management
What are the roles of internal audit? (6)
COSIER
- Reviewing COMPLIANCE with laws and other external regulations
- Examining OPERATING AND FINANCIAL information
- SPECIAL INVESTIGATIONS
- Monitoring INTERNAL CONTROL SYSTEMS
- Reviewing the ECONOMY, EFFICIENCY, and EFFECTIVENESS of operations
- Monitoring the overall RISK MANAGEMENT policy for effectiveness
What requires external audit?
Company law
What requires internal audit?
Board of directors/Audit committee
What appoints external audit
Shareholders/Board of directors
What appoints internal audit
Board of directors/Audit committee
What does the external audit report to?
Shareholders
What does the internal audit report to?
Board of directors/Audit committee
What does the external audit report on? (3)
- Whether the financial statements are true and fair
- Whether the financial statements are properly prepared
- Whether the directors’ report and strategic report is consistent with the financial statements
What does the internal audit report on?
Adequacy of internal controls
What is the scope of an external audit assignment?
Unlimited, to fulfil statutory obligations
What is the scope of an internal audit assignment?
Prescribed by management
