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Internal Auditing > The Internal Auditor's Interactions with key role players > Flashcards

The Internal Auditor's Interactions with key role players Flashcards

1
Q

State the four cornerstone of effective corporate goverance

A
  • Audit committee of the board of directors
  • Executive management
  • Internal auditor
  • External auditors
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2
Q

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

A

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

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3
Q

What is internal auditing?

A
  • 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
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4
Q

Complete this statement

Internal auditors should have…

A
  • Excellent communication skills
  • Listening skills
  • Soft skills - human interaction
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5
Q

Complete this statement

Internal auditors should report…

A
  • Weaknesses in the systems
  • Recommendations for improvement
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6
Q

Complete the sentence

Board of director determines…

A

The strategy and direction in which the organisation operates

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7
Q

Who does the CAE report the functionally to?

A

The board of directors

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8
Q

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

A
  • 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
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9
Q

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

A

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

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10
Q

What does the board of directors consist of?

A
  • Executive directors
  • Non-executive directors
  • Independent non-executive directors
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11
Q

Explain executive directors

A

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

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12
Q

Explain non-executive directors

A

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

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13
Q

Explain independent non-executive directors

A
  • 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
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14
Q

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

A

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

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15
Q

State Standard 2060

A

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

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16
Q

True or false

The CAE should submit annually activity to senior management and CEO

A

False

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

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17
Q

> Complete the sentence

The board of directors should be informed of…

A

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

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18
Q

True or false

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

A

True

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19
Q

Complete the sentence

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

A

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

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20
Q

What does the audit committee charter stipulates?

A

The role and responsibility of the organization

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21
Q

True or false

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

A

False

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

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22
Q

True or false

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

A

True

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23
Q

State the roles the internal auditing supports the audit committee

A
  • 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
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24
Q

True or false

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

A

False

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

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25
Q

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

A

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

26
Q

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

A

False

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

27
Q

True or false

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

A

True

28
Q

True or false

Together with external auditors, the CAE should discuss the fulfilment of the audit committee’s information needs

A

True

29
Q

True or false

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

A

True

30
Q

Complete the sentence

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

A

Internal auditors and external auditors

31
Q

What should the committee be able to determine?

A

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

32
Q

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

A

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

33
Q

True or false

Internal auditors must be free from undue influence by management

A

True

34
Q

State the administrative activities of internal auditors

A
  • Human resources administration
  • Internal communications and information flow
  • Budgeting
  • management accounting
  • Administration of internal policies and procedures
35
Q

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?

A
  • 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
36
Q

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?

A
  • Listening skills
  • Problem-solving skills
  • Control self-assessment techniques
37
Q

True or False

Internal auditors are employee of organisation and can be outsourced

A

False

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

38
Q

True or false

External auditors are employees of the organisation

A

False

An independent contractors

39
Q

True or False

Internal auditors serve the needs of the organisation

A

True

40
Q

True or False

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

A

False

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

41
Q

True or false

Internal auditors are appointed by external auditors

A

False

Internal auditors are appointed by management

42
Q

True or false

External auditors are appointed by shareholders

A

True

43
Q

True or false

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

A

True

44
Q

True or false

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

A

True

45
Q

Which regulatory body should aspiring internal auditors register with?

A

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

46
Q

Which regulatory body should external auditors register?

A

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

47
Q

What are internal auditors focuses?

A

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

48
Q

What are external auditors focuses?

A

On the accuracy and historical information expressed in the financial statements

49
Q

Complete the sentence

Internal auditors are concerned with…

A

The prevention and detection of fraud

50
Q

Complete the sentence

External auditors are concerned about…

A

The material mis-statements in the financial statements

51
Q

Internal auditors comply with what?

A

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

52
Q

External auditors comply with what standard?

A

The International Auditing standards and code of ethics issued by SAICA

53
Q

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

A
  • Financial audit engagement
  • Compliance audit engagement
  • Operational audit engagement
  • IT audit engagement
  • Environmental audit engagement
  • Forensic audit engagement
  • Risk management audit engagement
  • Consulting activities
54
Q

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

A
  • Financial audits
  • Other services
55
Q

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

A
  • 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
56
Q

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

A
  • 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
57
Q

State performance standard 2050

A

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.

58
Q

What assessments performances does the CAE on External auditors?

A
  • 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
59
Q

What is the reliance work of the internal auditors ?

A

ISA 610

60
Q

What do external auditors consider?

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

Internal Auditing (9 decks)

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