Flashcards in 5 - Internal Audit Deck (21)
What is external audit?
Provides assurance on the truth and fairness of an entity’s financial statements and the compliance with regs
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
Why might internal audit be required?
Statutory e.g bu law, building societies act
Regulatory e.g NHS
Risk management and effective internal controls is the responsibility of?
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
Criteria for effectiveness of the internal audit function?
Resource and competence
Internal audit plan
Prepared by head of internal audit
External audit concerns
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
Typical internal audit report?
Background and scope of audit
Necessary corrective action
Who received internal audit reports?
Draft to auditees to verify facts
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
To ensure effectiveness of IA the audit committee must?
Review and approve their remit
Review findings and ensure actioned
Ensure resources available
Ensure appropriate professional standards
Who should internal audit report to? INDEPENDENCE
CEO or chairman of audit committee
Should have access to AC if report to CEO
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
Why should IA have position and status?
So that their findings aren’t disregarded
So people listen and implement
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
IIA Attribute Standard 1312 suggests that?
IA function should be subjected to an external independent review once every 5 years
Sept 2014 FRC issued Guidance one Risk Management, this brought together previous research from?
Turnbull reports 2004
2009 Going Concern guidance
Sept 2014 FRC Guidance on risk management, internal control key findings on role of IA are?
Facilitate risk workshops
Assurance on controls
Relationship with audit committee
Assisting in changing environment
No role in strategic decision making
What does SOX require directors to do?
Produce internal audit report
Contain assessment of effective as of internal controls