The Internal Auditor's Interactions with key role players

Question 1

State the four cornerstone of effective corporate goverance

Answer 1

• Audit committee of the board of directors
• Executive management
• Internal auditor
• External auditors

Question 2

What happens when the four cornerstone of corporate goverance work together?

Answer 2

Healthy interdependence, internal controls are strong and reporting is accurate, ethics are maintained, oversight is effective, risks are mitigated and investments are protected

Question 3

What is internal auditing?

Answer 3

• Communicating with clarity and accurancy
• Examining global issues
• Assessing risks, controls, ethics, quality, economy and efficiency
• Analyzing opportunities
• Evaluating emerging technologies
• Assuring that controls are adequate to mitigate the risks

Question 4

Complete this statement

Internal auditors should have…

Answer 4

• Excellent communication skills
• Listening skills
• Soft skills - human interaction

Question 5

Complete this statement

Internal auditors should report…

Answer 5

• Weaknesses in the systems
• Recommendations for improvement

Question 6

Complete the sentence

Board of director determines…

Answer 6

The strategy and direction in which the organisation operates

Question 7

Who does the CAE report the functionally to?

Answer 7

The board of directors

Question 8

What does the functional reporting for the internal audit activity includes which activities?

Answer 8

• Approving of the internal audit charter
• Communicating on the audit engagement results
• Approving the appointment of the CAE
• Determining remuneration of the staff
• Reporting scope limitations

Question 9

Why is the internal auditing activity reported directly to the board of directors?

Answer 9

To strengthen independence and to provide a reporting line to the governing body within regard to management’s wrongdoings and/or inefficiencies

Question 10

What does the board of directors consist of?

Answer 10

• Executive directors
• Non-executive directors
• Independent non-executive directors

Question 11

Explain executive directors

Answer 11

Are part of the day to day activities of the organisation and receive a salary

Question 12

Explain non-executive directors

Answer 12

Are not part of the day to day activities of the organisation.
With no interest or prior involvement in the organisation

Question 13

Explain independent non-executive directors

Answer 13

• Are not part of operations, not related parties, no interest or prior involvement.
• Only receive a director’s remuneration for services rendered and are appointed for their particular skills and knowledge
• Retired CEO or senior management of similar organisation can only become independent non-executive director after more than 3 years of ending prior interest or any involvement

Question 14

Why are board of directors relay on the internal auditing activities?

Answer 14

To provide reasonable assurance that goverance, risk management and control processes are adequate and effective

Question 15

State Standard 2060

Answer 15

The CAE should periodically report to the board of directors and senior management on the internal auditing activities purposes, authority, responsibility and performance relative to the activity’s annual plan

Question 16

True or false

The CAE should submit annually activity to senior management and CEO

Answer 16

False

The CAE should submit annually activity to senior management and board of directors

Question 17

> Complete the sentence

The board of directors should be informed of…

Answer 17

Senior management’s divisions in all significant observations and recommendations, especially when internal auditing believes senior management has accepted a level of risk that is unacceptable to the organisation

Question 18

True or false

The audit committee is a subcommittee of the board of director and therefore part of the highest authority in the organisation

Answer 18

True

Question 19

Complete the sentence

The audit committee is the governance body charged with the oversight role over the…

Answer 19

Controls, the internal and external audit functions and the quality of an organization’s financial reporting practices

Question 20

What does the audit committee charter stipulates?

Answer 20

The role and responsibility of the organization

Question 21

True or false

An audit committee should be co-dependent with the management of the organization

Answer 21

False

An audit committee should be independent from with the management of the organization

Question 22

True or false

Internal auditors and audit committee have overlapping goals and objectives and their relationship is managed by the CAE

Answer 22

True

Question 23

State the roles the internal auditing supports the audit committee

Answer 23

• Reviewing the charter of the audit committee annually and advising on whether the charter addresses all the committee’s responsibilities
• Reviewing/maintaining a planning agenda, ascertaining whether they are connected and assisting the audit committee to report to the board of directors on these activities
• Drafting the audit committee’s meeting agenda for the chairman’s review and assisting with the distribution of materials to the members
• Encouraging the audit committee to conduct periodic reviews of its activities and practices compared with current best practice
• Meeting periodically with the committee’s chairperson to discuss the materials and the information being furnished to the committee are meeting their needs
• Enquiring from the audit committee about any training of new members on risk and controls is likely to be needed

Question 24

True or false

Audit committee should meet publicly with the CAE on a regular basis to discuss issues

Answer 24

False

Audit committee should meet with the CAE privately on a regular basis to discuss issues

Question 25

True or false The CAE should provide an semi-annual summary report on the results of the audit activities relating to the defined mission and scope of audit work

Answer 25

False The CAE should provide an annual summary report on the results of the audit activities relating to the defined mission and scope of audit work

Question 26

True or false The CAE should issue periodic reports to the board of directors, summarizing the results of all the audit activities performed by internal auditors

Answer 26

False The CAE should issue periodic reports to the audit committee summarizing the results of all the audit activities performed by internal auditors

Question 27

True or false The audit committee should be kept informed of emerging trends and successful practices in internal auditing by CAE

Answer 27

True

Question 28

True or false Together with external auditors, the CAE should discuss the fulfilment of the audit committee's information needs

Answer 28

True

Question 29

True or false The CAE should review information submitted to the audit committee for completeness and accuracy

Answer 29

True

Question 30

Complete the sentence The CAE should inform the committee whether there is effective and efficient co-ordination of activities between...

Answer 30

Internal auditors and external auditors

Question 31

What should the committee be able to determine?

Answer 31

If there is any duplication in the work of the internal and external auditors and CAE should provide the reasons for any duplications found

Question 32

Why is it that the management support of the Internal Auditors is crucial?

Answer 32

To enable internal auditor to perform their duties and support the organization in achieving its objective

Question 33

True or false Internal auditors must be free from undue influence by management

Answer 33

True

Question 34

State the administrative activities of internal auditors

Answer 34

- Human resources administration - Internal communications and information flow - Budgeting - management accounting - Administration of internal policies and procedures

Question 35

Conflict one Internal auditors - responsible for identifying any defects in the structure; identifying weakness and problems in the internal control proves that Internal auditing Staff - see internal auditors as watchdogs. What is the solution?

Answer 35

- Convince the engagement client to take part in the audit engagement process. Enables for the internal auditor to have the engagement client staff assist in obtaining evidence analyze and reach conclusions. - Allows self-review for client staff and feeling involved

Question 36

Conflict 2 Internal Auditor: In between engagement client management and engagement client staff. Are internal auditors partners of the engagement client or agents for management? Purpose to improve the organization, assist senior management Staff - resistant to change (prefers their comfort) What is the solution?

Answer 36

- Listening skills - Problem-solving skills - Control self-assessment techniques

Question 37

True or False Internal auditors are employee of organisation and can be outsourced

Answer 37

False Internal auditors are employee of organisation and can be outsourced and co-sourced

Question 38

True or false External auditors are employees of the organisation

Answer 38

False An independent contractors

Question 39

True or False Internal auditors serve the needs of the organisation

Answer 39

True

Question 40

True or False External auditors serve the needs of the CEO and the owners who need the reliable financial information

Answer 40

False External auditors serve the owners and third parties who need the reliable financial information

Question 41

True or false Internal auditors are appointed by external auditors

Answer 41

False Internal auditors are appointed by management

Question 42

True or false External auditors are appointed by shareholders

Answer 42

True

Question 43

True or false Internal auditors report internally to management, board of directors and audit committee

Answer 43

True

Question 44

True or false External auditors report internally to board of directors and audit committee and externally to shareholders

Answer 44

True

Question 45

Which regulatory body should aspiring internal auditors register with?

Answer 45

Certified Internal Auditor (CIA) with the Institute of Internal Auditors (IIA). Other certifications can also be obtained through the IIA and other professional bodies

Question 46

Which regulatory body should external auditors register?

Answer 46

Registered as a CA(SA) with the SAICA and with the independent regulatory board of Auditors (IRBA)

Question 47

What are internal auditors focuses?

Answer 47

On the past, present and the future events through evaluating controls designed to achieve the organisation's goals and objectives.

Question 48

What are external auditors focuses?

Answer 48

On the accuracy and historical information expressed in the financial statements

Question 49

Complete the sentence Internal auditors are concerned with...

Answer 49

The prevention and detection of fraud

Question 50

Complete the sentence External auditors are concerned about...

Answer 50

The material mis-statements in the financial statements

Question 51

Internal auditors comply with what?

Answer 51

The standards in the Professional Practice of Internal Auditing and the code of ethics of Institute of Internal Auditors

Question 52

External auditors comply with what standard?

Answer 52

The International Auditing standards and code of ethics issued by SAICA

Question 53

State the performance (inter alia) internal auditors do that's differ from external auditors?

Answer 53

- Financial audit engagement - Compliance audit engagement - Operational audit engagement - IT audit engagement - Environmental audit engagement - Forensic audit engagement - Risk management audit engagement - Consulting activities

Question 54

State the performances (inter alia) external auditors do that differ from internal auditors

Answer 54

- Financial audits - Other services

Question 55

State the value of co-ordination between internal and external auditors that external auditors gain

Answer 55

- In-depth knowledge and experience of Internal auditors within the organisation enables the external auditors to gain more insight into the workings of the organisation - To get the overall view of the organisation, as well as identifying areas where extra attention is needed - Clients relationship of the external auditor can be improved by a better understanding of the organisation and its structures, activities and processes

Question 56

What value does internal auditors gain from co-ordination with external auditors?

Answer 56

- Areas that require further investigation by the internal auditors after the external audit is done are identified by external auditors - The external auditor's appraisal of the internal auditing activities can enhance the internal auditor's status - Effective co-ordination and reliance of external auditors on internal auditors work can result in material savings in audit fees - The internal auditor will be exposed to other techniques and technical knowledge

Question 57

State performance standard 2050

Answer 57

Reflects the duty of the CAE to share information and co-ordinate efforts with other internal auditors and external provides of relevant assurance and consulting services.

Question 58

What assessments performances does the CAE on External auditors?

Answer 58

- Professional knowledge and experience - Independence - Knowledge of the organisation's industry - Availability of specialised services< - Anticipation of and responsiveness to the needs of the organisation - Reasonable continuity ok key engagement personnel - Maintenance of appropriate working relationships - Achievements of contract commitment - Delivery of overall value of the organisation

Question 59

What is the reliance work of the internal auditors ?

Answer 59

ISA 610

Question 60

What do external auditors consider?

Answer 60

- Organisational status of internal auditing activities - Scope of internal auditing function - Due professional care = combined assurance