The Internal Auditor's Interactions with key role players Flashcards
State the four cornerstone of effective corporate goverance
- Audit committee of the board of directors
- Executive management
- Internal auditor
- External auditors
What happens when the four cornerstone of corporate goverance work together?
Healthy interdependence, internal controls are strong and reporting is accurate, ethics are maintained, oversight is effective, risks are mitigated and investments are protected
What is internal auditing?
- 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
Complete this statement
Internal auditors should have…
- Excellent communication skills
- Listening skills
- Soft skills - human interaction
Complete this statement
Internal auditors should report…
- Weaknesses in the systems
- Recommendations for improvement
Complete the sentence
Board of director determines…
The strategy and direction in which the organisation operates
Who does the CAE report the functionally to?
The board of directors
What does the functional reporting for the internal audit activity includes which activities?
- 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
Why is the internal auditing activity reported directly to the board of directors?
To strengthen independence and to provide a reporting line to the governing body within regard to management’s wrongdoings and/or inefficiencies
What does the board of directors consist of?
- Executive directors
- Non-executive directors
- Independent non-executive directors
Explain executive directors
Are part of the day to day activities of the organisation and receive a salary
Explain non-executive directors
Are not part of the day to day activities of the organisation.
With no interest or prior involvement in the organisation
Explain independent non-executive directors
- 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
Why are board of directors relay on the internal auditing activities?
To provide reasonable assurance that goverance, risk management and control processes are adequate and effective
State Standard 2060
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
True or false
The CAE should submit annually activity to senior management and CEO
False
The CAE should submit annually activity to senior management and board of directors
> Complete the sentence
The board of directors should be informed of…
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
True or false
The audit committee is a subcommittee of the board of director and therefore part of the highest authority in the organisation
True
Complete the sentence
The audit committee is the governance body charged with the oversight role over the…
Controls, the internal and external audit functions and the quality of an organization’s financial reporting practices
What does the audit committee charter stipulates?
The role and responsibility of the organization
True or false
An audit committee should be co-dependent with the management of the organization
False
An audit committee should be independent from with the management of the organization
True or false
Internal auditors and audit committee have overlapping goals and objectives and their relationship is managed by the CAE
True
State the roles the internal auditing supports the audit committee
- 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
True or false
Audit committee should meet publicly with the CAE on a regular basis to discuss issues
False
Audit committee should meet with the CAE privately on a regular basis to discuss issues
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
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
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
False
The CAE should issue periodic reports to the audit committee summarizing the results of all the audit activities performed by internal auditors
True or false
The audit committee should be kept informed of emerging trends and successful practices in internal auditing by CAE
True
True or false
Together with external auditors, the CAE should discuss the fulfilment of the audit committee’s information needs
True
True or false
The CAE should review information submitted to the audit committee for completeness and accuracy
True
Complete the sentence
The CAE should inform the committee whether there is effective and efficient co-ordination of activities between…
Internal auditors and external auditors
What should the committee be able to determine?
If there is any duplication in the work of the internal and external auditors and CAE should provide the reasons for any duplications found
Why is it that the management support of the Internal Auditors is crucial?
To enable internal auditor to perform their duties and support the organization in achieving its objective
True or false
Internal auditors must be free from undue influence by management
True
State the administrative activities of internal auditors
- Human resources administration
- Internal communications and information flow
- Budgeting
- management accounting
- Administration of internal policies and procedures
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?
- 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
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?
- Listening skills
- Problem-solving skills
- Control self-assessment techniques
True or False
Internal auditors are employee of organisation and can be outsourced
False
Internal auditors are employee of organisation and can be outsourced and co-sourced
True or false
External auditors are employees of the organisation
False
An independent contractors
True or False
Internal auditors serve the needs of the organisation
True
True or False
External auditors serve the needs of the CEO and the owners who need the reliable financial information
False
External auditors serve the owners and third parties who need the reliable financial information
True or false
Internal auditors are appointed by external auditors
False
Internal auditors are appointed by management
True or false
External auditors are appointed by shareholders
True
True or false
Internal auditors report internally to management, board of directors and audit committee
True
True or false
External auditors report internally to board of directors and audit committee and externally to shareholders
True
Which regulatory body should aspiring internal auditors register with?
Certified Internal Auditor (CIA) with the Institute of Internal Auditors (IIA). Other certifications can also be obtained through the IIA and other professional bodies
Which regulatory body should external auditors register?
Registered as a CA(SA) with the SAICA and with the independent regulatory board of Auditors (IRBA)
What are internal auditors focuses?
On the past, present and the future events through evaluating controls designed to achieve the organisation’s goals and objectives.
What are external auditors focuses?
On the accuracy and historical information expressed in the financial statements
Complete the sentence
Internal auditors are concerned with…
The prevention and detection of fraud
Complete the sentence
External auditors are concerned about…
The material mis-statements in the financial statements
Internal auditors comply with what?
The standards in the Professional Practice of Internal Auditing and the code of ethics of Institute of Internal Auditors
External auditors comply with what standard?
The International Auditing standards and code of ethics issued by SAICA
State the performance (inter alia) internal auditors do that’s differ from external auditors?
- Financial audit engagement
- Compliance audit engagement
- Operational audit engagement
- IT audit engagement
- Environmental audit engagement
- Forensic audit engagement
- Risk management audit engagement
- Consulting activities
State the performances (inter alia) external auditors do that differ from internal auditors
- Financial audits
- Other services
State the value of co-ordination between internal and external auditors that external auditors gain
- 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
What value does internal auditors gain from co-ordination with external auditors?
- 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
State performance standard 2050
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.
What assessments performances does the CAE on External auditors?
- 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
What is the reliance work of the internal auditors ?
ISA 610
What do external auditors consider?
- Organisational status of internal auditing activities
- Scope of internal auditing function
- Due professional care = combined assurance
