AA corpgov

Which of the following factors would have been taken into account by ABC Co's audit committee when assessing the need for an internal audit function?

(1) It provides a means of satisfying corporate governance requirements for risk management

(2) The set-up and running costs versus the benefits

(3) The increased scale and complexity of ABC's operations

(4) The additional workload which department heads have been experiencing
Co.

• 1 and 2 only
  

• 2, 3 and 4 only
  

• 1, 3 and 4
  

• 1, 2, 3 and 4
  

The members of the audit committee are preparing to put forward their recommendation to the board. Which two of the following statements correctly describes the role that the internal audit function may play in ABC Co if best practice is followed?

• Assessing and monitoring internal control procedures

• Managing the accounting and finance department

• Evaluating the overall risk management policies of the company

• Implementing changes to systems

Following the audit committee's presentation to the board, the sales director complains that he doesn't understand the need for internal auditors when the company already employs a firm of external auditors. Which two of the following statements could be used by members of the audit committee in their explanation of the differences between internal and external auditors?

• The role of the external auditor is set down in law whilst the role of the internal auditor will depend on the requirements of the company.

• The internal auditor can be an employee of the company whilst the external auditor must be independent.

• The external auditor's report must be addressed to the board of directors whilst internal auditor's reports must be addressed to shareholders.

• External auditors must be members of a professional body whilst internal auditors must satisfy training and experience criteria set down in law.

The ABC Co board has agreed with the audit committee's recommendation that an internal audit function is required. However the board is concerned about the cost of establishing an internal audit department and is considering the option of outsourcing this function. Indicate whether the following are advantages of outsourcing or establishing an internal audit department in-house. Which of the following is/are advantages of outsourcing?

• Provides flexibility with regards to level of staffing and resources

• Develops expertise of ABC Co staff

• Results in lower staff training costs

• Provides access to specialist skills

After careful consideration, the board has decided to establish an in-house internal audit department. Applying the principles of corporate governance best practice, to whom should the internal audit department report?

• The board of directors

• The external auditors

• The audit committee

• The finance director

From a review of the information above, your audit assistant has highlighted some of the potential risks to independence in respect of the audit of Stark. Which of the following options best identifies the advocacy threats to independence and allocates the threat to the most appropriate category?

• Mr Day would like his daughter Zoe to be part of the audit team

• Audit team to be offered a balloon flight

• Tax fee to be based on a percentage of tax saved

• Firm to represent Stark in a dispute with the tax authorities

Which of the following options best identifies the intimidation threats to independence and allocates the threat to the most appropriate category?

• Mr Day would like his daughter Zoe to be part of the audit team

• Audit team to be offered a balloon flight

• Tax fee to be based on a percentage of tax saved

• Firm to represent Stark in a dispute with the tax authorities

Which of the following options best identifies the self-interest threats to independence and allocates the threat to the most appropriate category?

• Mr Day would like his daughter Zoe to be part of the audit team

• Audit team to be offered a balloon flight

• Tax fee to be based on a percentage of tax saved

• Firm to represent Stark in a dispute with the tax authorities

In relation to the audit team being offered a balloon ride: Which of the following actions should be taken to ensure the firm complies with ACCA's Code of Ethics and Conduct?

• The gift may be accepted as Stark has taken appropriate measures to reduce the value of the gift compared to previous years.

• The value of the gift should be assessed to determine whether it is of material value to the financial statements.

• The gift should only be accepted if its value is trivial and inconsequential to the recipients.

• Only the audit engagement partner and audit manager should accept the gift

In relation to the audit engagement partner holding the role for nine years: Which of the following safeguards should be implemented in order to comply with ACCA's Code of Ethics and Conduct?

• An independent review partner should be appointed to the audit.

• The audit engagement partner should be removed from the audit team but may serve as a quality control reviewer.

• Ali & Co should not audit Stark for a two-year period.

• The audit engagement partner should be removed from the audit team