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Internal Audit
Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. Here on MCQs.club we have made helpful Multiple-Choice Questions (MCQs) on Internal Audit that fully cover MCQs on internal auditing, internal auditing report, definitions, internal audit vs external audit, internal audit reporting and internal auditing process. These MCQs are helpful for Competitive exams, Professional accountancy exams and Business management exams.
- Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations.
- True
- False
- The need for internal audit (IA) therefore will depend on:
- Number of employees. The greater the number of employees the greater the risk of fraud.
- Scale and diversity of activities
- The more complex the organisation is, the greater the benefit obtained from having an IA function as there is greater risk of things going wrong.
- All of the above
- External auditors –
- Express an opinion on the truth and fairness of the financial statements in a written report.
- Reports to shareholders
- Audit report is publicly available.
- Verifies the truth and fairness of the financial statements.
- All of the above
- Internal auditors –
- Improve the company’s operations by reviewing the efficiency and effectiveness of internal controls.
- Reports to management or those charged with governance.
- Their report Not publicly available.
- Wide in scope and dependent on management’s requirements.
- All of the above
- Key activities of the internal audit function include:
- Assessing whether the company is demonstrating best practice in corporate governance.
- Assessing the economy, efficiency and effectiveness of operating activities (value for money).
- Providing recommendations on the prevention and detection of fraud.
- All of the above
- Internal audit may carry out ad hoc assignments, as required by management. Example include:
- Fraud investigations
- IT systems reviews – performing a review of the computer environment and controls.
- Providing direct assistance to the external auditor
- All of the above
- Qualities of an effective internal audit function are:
- Sufficiently resourced, both financially and in terms of qualified, experienced staff.
- Well organised, so that it has well developed work practices.
- Independent and objective to provide an unbiased view of the organisation’s operations.
- Chief internal auditor appointed by the audit committee to reduce management bias.
- No operational responsibilities to reduce the threat of self-review.
- Work plan agreed by the audit committee.
- No limitation on the scope of their work i.e. full access to every part of the organisation.
- All of the above
- (I) (III) and (VI) only
- (II) (IV) and (V) only
- None
- Limitations of internal audit include:
- There may be a familiarity threat as they will be auditing the work of long-standing colleagues and friends.
- Internal auditors may be employees of the company they are reporting on and therefore may not wish to raise issues in case they lose their job.
- Both A&B
- None
- It is difficult for internal audit to remain truly objective. However, acceptable levels of independence can be achieved through strategies such as:
- Reporting channels separate from the management of the main financial reporting function.
- Reviews of internal audit work by managers independent of the function under scrutiny.
- Outsourcing the internal audit function to a professional third party.
- All of the above
- Internal auditors perform many different types of assignment. Common examples include:
- Value for money assignments
- Operational audits
- The audit of IT systems
- Financial audit.
- All of the above
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