F8-复习-5

Chapter 5 Internal audit
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Definition of Internal Audit
— It is generally a feature of large companies.
— It is a function, provided either by employees of the entity or sourced from an external organization, to assist management in achieving corporate objectives.
—Unexpected occurrences
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Outsourcing internal audit
Advantages Disadvantages Increased independence of Cost to company internal auditors Limited knowledge of specific Relevant accounting and auditing entity skills Independence issues if external Increased reliability auditor provides internal audit function Frees up staff time Company loses in-house skills Commercially sensitive data may be lost Staff may oppose outsourcing if it involves redundancies
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Internal audit department
—Regular report to audit committee
—Direct access to board chairman and audit committee —Accountable to audit committee
No responsibility for prevention BUT —Responsibility to consider the risk of material misstatement in the financial statements (FS) due to fraud and error
—Make sure the whole audit team is aware of the risks and responsibilities of fraud and error.
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Independent, appointed by shareholders
Report to/ Scope
High Management or AC/ Any
Relationships
Employees or outsourced
Yes
Qualification
Not required
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— Auditors should maintain professional skepticism throughout the audit and recognize the fact that audit procedures that are effective in detecting errors may not be effective in detecting fraud.
This is effected by having a commitment to creating a culture of honesty and ethical behavior and active oversight by those charged with governLEARNING MEDIA
Slide 55
Internal audit reports
—Format will vary
—May include executive summary —Findings and recommendations
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Use of internal auditor’s work by external auditor
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The Audit Committee and IA
—Monitor and review effectiveness of IA
—Approve appointment/termination of appointment of head of IA —Review and assess IA work plan —Monitor management responsiveness to IA reports —Meet head of IA at least once a year without management
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Assessing the need for internal audit
—Trends or factors that have increased risks
—Organisational restructuring or changes in processes and systems —Adverse trends noted in monitoring of internal control systems
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Value for money
Value for money (VFM) audits examine the economy, efficiency and effectiveness of activities and processes. These are known as the three Es of VFM audits.
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Fraud risk
•Fraud is an intentional act by one or more individuals among management, those charged with governance, employees or third parties involving the use of deception to obtain an unjust or illegal advantage. Fraud may be perpetrated by an individual, or colluded in, with people internal or external to the business.
Slide 58
Fraud-responsibility (management)
The primary responsibility for the prevention and detection of fraud is with those charged with governance and the management of an entity.
—The UK Corporate Governance Code does not require all listed companies to have an internal audit function, although most do —Where listed companies do not have an internal audit function they should review the need for one annually
•Specifically, there are two types of fraud causing material misstatement in the financial statements: -Fraudulent financial reporting -Misappropriation of assets
— Can contribute to detection by reporting suspicions — May be called upon to investigate suspected fraud
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Fraud-responsibility Responsibilities for (External fraud and auditors) error 1
Fraud-responsibility (Internal auditors)
Internal auditors — Directors responsible for prevention and detection
— Internal audit can assist directors by assessing effectiveness of Internal controls — Existence of IA department may act as a deterrent
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