ICAEW Chapter 9: Internal audit

The scope and objectives of the internal audit function vary widely and depend on the size and structure of the entity and the requirements of its management. Which three of the following functions could internal audit perform and still operate effectively?

• Evaluating corporate objectives

• Performing operational audits

• Monitoring controls

• Authorising transactions

The scope and objectives of the internal audit function vary widely and depend on the size and structure of the entity and the requirements of its management. Which three of the following functions could internal audit perform and still operate effectively?

• Advising on the implementation of accounting and operational standards

• Liaising with external auditors

• Recommending improvements in operations

• Voting on decisions that involve external audit matters

Smarter Supermarkets operates a chain of fifteen supermarkets across London. At head office, there is an internal audit function which carries out audits and investigations on the individual supermarkets in the chain. Which two of the following could the internal audit function carry out and still operate effectively?

• Tests of the controls at the Westminster supermarket as part of a routine internal audit cycle

• Temporarily filling the role of the Lewisham supermarket manager while she is on sick leave

• Identification of risks at the proposed Waterloo supermarket, which is due to open next year

• Investigation into the physical controls at all the supermarkets

Many of the procedures undertaken by the internal auditor are very similar to those performed by the external auditor. Which three of the following will normally be done by the external auditor?

• Testing internal controls

• Making recommendations regarding improvements to controls

• Making recommendations on the overall operational effectiveness of the entity

• Examining and testing financial information

The scope and objectives of the internal audit function vary widely and depend on the size and structure of the entity and the requirements of its management. Which two of the following functions could internal audit perform and still operate effectively?

• Preparation of reconciliations between the payables account and supplier statements

• Approving annual budgets

• Reviewing accounting systems and related controls

• Examining financial and operational information for management

Which one of the following is the main reason why the internal audit function should not get involved in operational matters?

• For reasons of confidentiality

• To preserve their integrity

• Internal auditors do not possess the skills to handle operational matters

• To preserve their independence

In order to preserve their independence, the internal audit function should report directly to which one of the following?

• The chief accountant

• The finance director

• The audit committee

• The non-executive directors

Internal and external auditors provide a variety of services to companies. For each of the following examples select whether it is a service which would be provided by internal auditors only, by external auditors only or by either. Preparation of a report on the effectiveness of internal controls:

• Internal auditors

• External auditors

• Either

• Both internal auditor and external auditor

The following statements relate to the differences between internal and external auditors. Select whether it is true or false. Internal auditors should not co-operate with external auditors.

• True

• False

Internal and external auditors provide a variety of services to companies. For each of the following examples select whether it is a service which would be provided by internal auditors only, by external auditors only or by either. "Investigation into a material fraud committed in the entity"

• Internal auditor

• External auditor

• Either

• Both of Internal and External Auditor