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Questions and Answers
What is one of the primary reasons internal auditors interact with management?
What is one of the primary reasons internal auditors interact with management?
Who is responsible for overseeing the internal audit function?
Who is responsible for overseeing the internal audit function?
What is a key responsibility of operational management in terms of internal audit?
What is a key responsibility of operational management in terms of internal audit?
What is a key responsibility of management in terms of internal audit?
What is a key responsibility of management in terms of internal audit?
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What is one of the primary reasons internal auditors interact with the audit committee?
What is one of the primary reasons internal auditors interact with the audit committee?
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Why do internal auditors interact with operational management?
Why do internal auditors interact with operational management?
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What is a key responsibility of external auditors in terms of internal audit?
What is a key responsibility of external auditors in terms of internal audit?
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Why does the internal audit activity report directly to the board?
Why does the internal audit activity report directly to the board?
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What is the primary purpose of the internal audit activity's reporting to the board?
What is the primary purpose of the internal audit activity's reporting to the board?
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Who does the chief audit executive periodically report to?
Who does the chief audit executive periodically report to?
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Why is it important for boards of directors to have expert advisors?
Why is it important for boards of directors to have expert advisors?
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What type of directors are not part of the day-to-day activities of the organisation?
What type of directors are not part of the day-to-day activities of the organisation?
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Who should the chief audit executive report to annually?
Who should the chief audit executive report to annually?
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Why should the chief audit executive inform the board of directors about previously reported significant observations and recommendations?
Why should the chief audit executive inform the board of directors about previously reported significant observations and recommendations?
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What should be the focus of the chief audit executive's report to senior management and the board of directors?
What should be the focus of the chief audit executive's report to senior management and the board of directors?
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What should the board of directors be informed about regarding senior management's decisions on significant observations and recommendations?
What should the board of directors be informed about regarding senior management's decisions on significant observations and recommendations?
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Why is a close relationship between the audit team and the directors necessary?
Why is a close relationship between the audit team and the directors necessary?
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Study Notes
Internal Auditor Interaction with Role Players
Interaction with Management
- Internal auditors interact with management to:
- Discuss audit findings and recommendations
- Obtain information and explanations for transactions and activities
- Provide guidance on internal control and risk management
- Management's responsibilities:
- Implement audit recommendations
- Provide necessary information and resources
- Ensure audit findings are addressed
Interaction with Audit Committee
- Internal auditors interact with the audit committee to:
- Report on audit findings and recommendations
- Provide assurance on internal controls and risk management
- Obtain guidance on audit priorities and scope
- Audit committee's responsibilities:
- Oversee internal audit function
- Review and approve audit plans and reports
- Ensure audit findings are addressed
Interaction with External Auditors
- Internal auditors interact with external auditors to:
- Coordinate audit efforts and avoid duplication
- Share knowledge and expertise
- Ensure consistency in audit procedures and reporting
- External auditors' responsibilities:
- Conduct annual financial statement audits
- Provide independent assurance on financial statements
- Collaborate with internal auditors on audit planning and execution
Interaction with Operational Management
- Internal auditors interact with operational management to:
- Gain understanding of business processes and operations
- Identify control weaknesses and opportunities for improvement
- Provide guidance on internal control and risk management
- Operational management's responsibilities:
- Implement controls and procedures
- Ensure adherence to policies and procedures
- Collaborate with internal auditors on audit planning and execution
Interaction with Management
- Internal auditors discuss audit findings and recommendations with management.
- Management is responsible for implementing audit recommendations and providing necessary information and resources.
Interaction with Audit Committee
- Internal auditors report on audit findings and recommendations to the audit committee.
- The audit committee oversees the internal audit function, reviews and approves audit plans and reports, and ensures audit findings are addressed.
Interaction with External Auditors
- Internal auditors coordinate with external auditors to avoid duplication of efforts and share knowledge and expertise.
- External auditors conduct annual financial statement audits and provide independent assurance on financial statements.
Interaction with Operational Management
- Internal auditors interact with operational management to gain an understanding of business processes and operations.
- Operational management is responsible for implementing controls and procedures, ensuring adherence to policies and procedures, and collaborating with internal auditors on audit planning and execution.
Independence and Reporting
- Internal audit activity reports directly to the board to strengthen independence and provide a reporting line for management's wrongdoings and/or inefficiencies.
- This direct reporting ensures the internal audit function is independent from management.
Board of Directors
- A board of directors can consist of executive and non-executive directors.
- Executive directors are part of the day-to-day activities of the organization and receive a salary.
- Non-executive directors are not part of the day-to-day activities and receive a director's remuneration for services rendered.
- Independent non-executive directors have no interest or prior involvement in the organization and are appointed for their particular skills and knowledge.
Director Responsibility
- The responsibility of directors has increased significantly in recent years due to increased court actions against directors.
- Directors are held accountable by courts of law if shareholder wealth diminishes due to their business judgments.
Role of Internal Audit
- Internal auditors provide a reliable and informative source of assurance and advice to the board of directors.
- The board relies on internal audit to provide reasonable assurance that governance, risk management, and control processes are adequate and effective.
Reporting Process
- The chief audit executive should periodically report to the board of directors and senior management on the internal audit activity's purpose, authority, responsibility, and performance.
- Reports should include significant risk exposures, control issues, governance issues, and other matters needed or requested by the board and senior management.
Best Practices
- The chief audit executive should submit annual activity reports to senior management and the board of directors.
- Reports should focus on significant deviations from the plan, significant engagement observations, and recommendations.
- The chief audit executive should communicate significant engagement observations and recommendations to the board of directors.
- The board of directors should be informed of senior management's decisions on all significant observations and recommendations.
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Description
This quiz assesses knowledge of internal auditor interactions with management, including discussing audit findings, obtaining information, and providing guidance on internal control and risk management. It also covers management's responsibilities in implementing audit recommendations and addressing audit findings.
