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1

What is external audit?

Provides assurance on the truth and fairness of an entity’s financial statements and the compliance with regs

2

What is internal audit?

Provide assurance to the directors and management that it’s processes, procedures and activities are operations effectively and efficiently

Independent objective assurance and consulting activity
Improve operations and add value
Systematic disciplined approach to evaluate effectiveness of risk management control and governance

3

Why might internal audit be required?

Statutory e.g bu law, building societies act
Regulatory e.g NHS
Management

4

Risk management and effective internal controls is the responsibility of?

The board

5

Where doe regulatory requirements for internal audit emanate from?

Directives from Committee of Public Accounts
Directives by Secretary of State to nationalised bodies
Recommendations arising from public investigations

Banks required by PRA to have IA

6

Criteria for effectiveness of the internal audit function?

Process
Audit committee
Resource and competence
Independence
Status
Standards

7

Internal audit plan

Prepared by head of internal audit
Factors:
Risk analysis
External audit concerns
Resource availability
Management concerns

8

Internal audit procedures?

Audit strategy memorandum - timing etc
Planning stage - fieldwork
Document and review work
Findings agreed with members of staff responsible for area before reporting to management

9

Typical internal audit report?

Background and scope of audit
Findings
Necessary corrective action

10

Who received internal audit reports?

Draft to auditees to verify facts
Senior members
Audit committee
External audit

11

Role of audit committee?

Monitor and review effectiveness of internal audit function

Consider factors e.g market environment, changes in structure and risks, unexpected results

12

To ensure effectiveness of IA the audit committee must?

Review and approve their remit
Review findings and ensure actioned
Assess independence
Ensure resources available
Ensure appropriate professional standards

13

Who should internal audit report to? INDEPENDENCE

CEO or chairman of audit committee
Should have access to AC if report to CEO

14

Factors of independence for internal audit?

Reporting to audit committee
Audit plan approval by AC
Appointment of internal audit manager
Salaries and appraisal by AC
Can’t be responsible for day to day of work they are reviewing

15

Why should IA have position and status?

So that their findings aren’t disregarded
So people listen and implement

16

Internal auditing standards?

International standards for the professional practice of internal auditing

- Adhere to IPP framework
- framework for a it iris
- basis for evaluation of performance
- improved process and operations

17

IIA Attribute Standard 1312 suggests that?

IA function should be subjected to an external independent review once every 5 years

18

Sept 2014 FRC issued Guidance one Risk Management, this brought together previous research from?

Turnbull reports 2004

2009 Going Concern guidance

19

Sept 2014 FRC Guidance on risk management, internal control key findings on role of IA are?

Facilitate risk workshops
Assurance on controls
Educational roles
Training ground
Communication
Relationship with audit committee
Assisting in changing environment
No role in strategic decision making

20

What does SOX require directors to do?

Produce internal audit report
Contain assessment of effective as of internal controls

21

Difference between internal and external audit?

Internal audit reports to AC
For board and management to evaluate effectiveness and efficiency of internal controls
Duty to search and discover fraud

EA for stakeholders
To give true and fair view of FS
Procedures not designed for internal controls
No duty to detect fraud