Internal Audit

Question 1

Lightening plc has an organisational structure which includes accounting, human resources, internal audit and audit committee. Which department should not be involved in determining pay rises?

A. Accounting
B. Human resources
C. Internal audit
D. Audit committee

Answer 1

C. Internal audit

Internal audit cannot be involved with operational activities, since these are the activities that they are auditing!

Question 2

What is an internal audit?

Answer 2

Appraisal activity established or provided as a service to the entity

Question 3

What are the key differences between external and internal audit?

Answer 3

1. External report to members (shareholders), internal report to directors
2. External report on FS, internal report on systems, controls and risks
3. External are independent to organisation, internal are often employed by it

Question 4

Is it possible to buy an internal audit service from an external organisation?

Answer 4

Yes! Internal audits can be outsourced

Question 5

As objectivity is a key issue for internal auditors, are they likely to be involved in operational activities?

Answer 5

No, they have to remain separated from operating activities as they are auditing them.