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Internal Auditing Basics

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Questions and Answers

What is the primary goal of internal auditing?

To add value and improve an organization's operations (correct)

To ensure compliance with SOX regulations

To evaluate the performance of the audit committee

To conduct financial audits of the organization

Who should make the decision about whether to establish and maintain an internal audit function or outsource the function?

Independent auditors

The audit committee

The board of directors and its representatives (correct)

Senior management

What is a limitation imposed by SOX on independent auditors?

They cannot perform both audit services on financial statements and internal audit outsourcing to the same public client for the same fiscal year (correct)

They cannot perform internal auditing outsourcing services for non-public clients

They cannot perform audit services on financial statements

They cannot provide consulting services to their clients

What is a factor that should be considered when deciding whether to outsource the internal audit function?

The company's geographic diversity of operations Signup and view all the answers

What type of services are prohibited by SEC rules for auditors?

Services that may be subject to audit procedures Signup and view all the answers

Why are external auditors prohibited from providing internal audit services related to internal accounting controls?

To maintain the auditor's independence and prevent auditing their own work Signup and view all the answers

What is a responsibility of the external auditor under GAAS or applicable attestation standards?

Evaluating the company's internal controls and making recommendations for improvement Signup and view all the answers

What is the primary benefit of a close working relationship between the audit committee and internal auditors?

Improved corporate governance Signup and view all the answers

What is essential for the success of internal auditors and the achievement of their value-added activities?

Having sufficient independence from management by reporting to the audit committee Signup and view all the answers

What is a prohibited service for an external auditor when providing attest services related to internal controls?

Providing internal audit services related to internal accounting controls Signup and view all the answers