AA – L2 – SA – Q1.4 – Internal Audit Functions

Identify two effective internal audit functions.

Question

The objectives and scope of the internal audit function vary widely and depend on the structure and size of the entity plus the requirements of management. Which TWO of the following functions could internal audit perform and still operate effectively? A Examining financial and operational information for management B Reviewing accounting systems and related controls C Approving annual budgets D Preparing reconciliations between the receivables ledger control account and the receivables ledger

Answer

A, B

Explanation:
Internal audit focuses on evaluating and improving processes, such as examining financial and operational information (A) and reviewing accounting systems and controls (B), both of which align with its role. Approving budgets (C) is a management function, not internal audit, as it compromises independence. Preparing reconciliations (D) is an operational task, not an audit function, as it involves executing rather than reviewing processes. Thus, A and B are correct.

Tags: Audit functions, Controls, ICAG, Internal Audit, Management
Level: Level 2

Topic: Internal Audit and Its Relationship with External Audit

Uploader: Salamat Hamid