Lecture 12 Flashcards
Internal audit responsibilities (3)
- Test effectiveness of internal controls
- Perform fraud investigations
- Deterrent
Internal audit purpose
To provide opinion on credibility and reliability of financial reports produced by an organisation
Internal audit aims (3)
- Aid achievement business objectives
- Improve efficiency and effectiveness
- Aid risk management
Internal audit Objective> Report to/ format> Status> Qualification>
Anything
Management/ any
Employees
Not required
For external auditors to rely on internal audit, consider (4)
- Organisational status of internal audit
- Scope
- Competence/ experience
- Sufficiency complementary evidence
Outsourcing internal audit > benefits (6)
- Independent
- Specialists
- Lower cost
- Liability passes onto someone else
- Consistent with external audit
- Reduces management time spent
Outsourcing internal audit > disadvantages (5)
- Reduced flexibility
- Constraints of service, only what agreed in contract
- Not specific to company
- Needs monitoring/ checking
- Time differences
Financial Conduct Authority (FCA)
Independent public body funded by firms it regulates. Accountable to treasury.
FCA focuses on: (3)
- Financial crime
- Credit
- Culture and conduct
3 lines of defence internal audit
First > Owns risks, ensures correct controls in place to mitigate
Second > Sets policy and guidelines managing risk
Third > Provides independent assurance to management that risk management, governance and internal control processes designed and operating effectively
Risk =
Possibility of event occurring that will have impact achievement business objectives
Risk measured in terms of (2)
- Impact
- Likelihood
IIA =
Chartered Institute for Internal Auditors
RBIA =
Risk based internal audit
Risk based internal audit
Focuses on risk, not policies. Give advice but can’t force departments to comply
