Internal Auditing (Coursework Sample)

AUDITING 1
ASSIGNMENT 2
072109
Internal Auditing – An independent appraisal function of examining and testing an organization’s risk management internal controls and corporate governance systems.
Role of Internal Auditing
According to what auditing plays in relation to audit planning it has a key impact on an organization which includes:
1 Examination of adequacy and effectiveness of internal control system.
2 Review of reliability, integrity, adequacy, timeliness of financial and operating information.
3 Determination of effectiveness, efficiency and also economy of the operations of the entity.
4 Review of the system to ensure compliance with all laws and regulations and management policies.
Types of Internal Audits
1 Financial Audits – Addresses issues regarding internal controls accounting and propriety of financial transactions.
2 Operational Audits – Performance of a review on use of resources and practices within departments to determine efficiency and effectiveness of meeting their goals.
* Key in assessment of internal control unit of an organization to mitigate upon inherent risks.
3 Compliance Audits - Determination of adherence to laws, regulations and policies for operating within the organization.
4 Information Technology Audits- Evaluation of data security, system procedures, backup planning and system requirements.
Roles and Responsibilities of Audit Committee
The role of the audit committee is viewed according to the organization’s governance process. The audit committee works in accountability to the board of directors. Therefore, good governance has to be adopted to ensure accountability on key players and create value to shareholders.
Responsibilities of the Audit Committee
1 Independent Auditing- The independent auditor who plays a key role in the financial governance process reports to the audit committee. The committee will then have to approve and provide oversight with reference to the audit engagement and any non -audit services to be provided by the independent auditor.
2 Disclosure- The audit committee reviews financial statements, annual and interim earnings and management and discussion analysis. The committee has to review if management has followed procedures before public disclosure of this information.
3 Risk Management- The audit committee has the mandate of discussing risk assessment and management.
4 Complaints- The audit committee must put across procedures for receiving and treating complains regarding accounting, internal accounting controls and auditing matters.
Distinction between Internal and External Audit
Internal Audit focusses on operations of an entire business while External Audit will only focus on financial statements of an entity. However distinguishing these two types of audit can be done based on a number of variables which include:
1 Objective- Internal Audit is designed to add value and improve an organization’s performance.
External Audit is an exercise to enable auditors express an opinion on financial statements of an entity.
2 Reporting – Internal Audit work is reported to the board of directors or other people charged with governance such as the audit committee.
External Audit work is reported to shareholders or members of a company based on truth and fairness of accounts.
3 Scope- Internal Audit work covers operations of an organiz...