Sunday, March 13, 2016

Internal Audit

Class Synopsis on: Internal Audit
Assurance: Knowledge Level
Amin Siddiki FCA

The New Internal Audit Department
“We’re here to help!”
Teach + Train = Change
Promote effective, efficient and ethical practices and procedures
Definition: An appraisal or monitoring activity established within an entity as a service to the entity.
Function of Internal Audit:
Examining, Evaluating and Reportingtomanagement & the directorsonthe adequacy & effectiveness of components of the accounting & internal control systems.
          Who ?
          Employee of the entity or
          To assist management / board  in achieving corporate objectives
          It is a recognised way of ensuring good corporate governance.

How to assist board / Management
          Acting as auditors for board reports not audited by the external auditors.
          Being the experts in fields (ie: implementation of new accounting & auditing standards)
          Liaison with external auditor, Particularly where external auditor use internal audit work

Difference between Internal and External Audit
Internal Audit
External Audit
It is an activity designed to add value and improve an organisation’s operation
To express an independent opinion on Financial Statements
Appointed by
Responsible to
Relating to
Whole operation of the organisation  both financial and non financial
Concern to the Financial Statement and related information
Who they are
Usually employee
Independent Firm

          Activities of Internal Audit
          Monitoring internal control
          Examining financial & operating information
          Review of the economy, efficiency and effectiveness of operations
          Review of compliance with laws, regulations and other external requirements
          Special investigations; ie: Suspected fraud

          Internal audit to Risk Management
       Internal Audit has a two folds role in relation to risk management
       Monitoring the company’s overall risk management policy to ensure it operates effectively
       Monitoring the strategies implemented to ensure that they continue to operate effectively
          Internal audit to Internal Control
          Key role of internal audit is to monitor the overall process and in providing assurance that the systems meet objectives and operative effectively.
          Internal audit to operational Audit
          Operational/Management/Efficiency audit is the operational processes of the organiasation. Their prime objective is the monitoring of management’s performance, ensuring company policy is adhered to.
          There are two aspects of an operational assignment:
          Ensure policies are adequate
          Ensure policies work effectively
          Ensure policy are adequate
          Internal auditor will have to review whether the policies are adequate or not. If required advice to board to improve.
          Ensure policies work effectively
          The auditor will have to examine the effectiveness of the controls by testing.
Thank You