- 10 Marks
Question
An internal audit is an independent appraisal activity within an organisation for the review of accounting, financial, and other operations with the objective of assisting members of the organisation to discharge their responsibilities effectively. It is a sound policy to establish constructive working relationships with internal audit units to foster the development, promote coordinated coverage, and avoid duplication.
Required:
Explain the five criteria employed by the external auditors to assess the likely effectiveness and relevance of the internal audit functions and five areas where the internal audit functions can be of assistance to the external audit.
Answer
Criteria for Assessing the Internal Audit Function
- Independence: The degree of independence from management, which ensures unbiased opinions.
- Scope and Objectives: Defined by management, it evaluates the areas reviewed by the internal audit.
- Professional Competence: Whether internal auditors belong to a professional body and have practical experience.
- Due Professional Care: Ensures that work is well planned, recorded, and reviewed.
- Quality of Reports: The relevance of the internal audit reports to management and the extent to which recommendations are acted upon.
Areas of Assistance
- Attendance at inventory counts.
- Conducting compliance tests for accounting controls.
- Assisting with pay parades.
- Testing transactions like payables, receivables, etc.
- Reviewing underlying evidence used by the external auditors.
- Tags: Audit Effectiveness, External audit, Internal Audit, Public Sector
- Level: Level 2
- Topic: Public sector audit
- Series: NOV 2020
- Uploader: Kwame Aikins