CHAPTER 7

INTERNAL AUDIT
CHAPTER 7: INTERNAL AUDIT
SCOPE
AND
STRUCTURE

TYPES
INTERNAL
OF
CONTROL AUDIT

AUDIT
PROCESS
 The scale, diversity and
complexity of the 1
company’s activities
2 The number of employees F
A Cost/benefit considerations3

Changes in the
C
4 organizational
structures, reporting
T
processes O Changes in key risks could be
5
internal or external in nature

6
Problems with existing R
internal control systems.
S An increased number of
unexplained or unacceptable
7
events.
 Attribute standards for internal audit

01 INDEPENDENCE

02 OBJECTIVITY

03 Professional care
 Scope and standard of internal audit work

The
In internal
this This
function,auditor
is also
the checks
called
internal a the
value financial
auditor for money
does controls
start(VFM)
to inaudit.
work theon
company,
The The
risks.
Internal
The internal
This auditauditors
objectiveteamis ensure
may work
particularly that reporting
closely with
relevant of financial
the
under external
corporate auditors
possibly
auditor assisting
Investigations
auditor
may into
checks
be or
asked sharing
other
whether
to areas awork
of with
the
particular
investigate areasthe
company’sexternal
activity
of risk is auditor.
business, e.g.The
cost-effective
management, with
information
and provide is made
information
governance codes thatoncan
where athe
timely basisauditor
beinternal
utilised and
in thethat thebe audit.
external
will
internal auditor
specific woulduses
(economical),
reference comment
on checking
the
how onthe
minimum
the whether
cost
company appropriate
inputs for
identifies,a givencontrols
output
assesses andexist
Therecarryinginformation
is an obvious
out in thework
benefit
detailed reports
to is factually
thetocompany
ensure from
that accurate.
this in control
internal the form of
as well as
estimates
controls whether they
for a newand
(efficient)
significant are
risks working
factory,
meets
from correctly.
oritsinvestigating
stated
both internal In this
suspected
objectives
and work,
external the
fraud.
(effective). internal
sources.
systems a financial
reductionreportsin the audit
meet fee.
auditor does and
not manage risk, but simply stock exchange
reports on controls.
e
requirements.
Reviewing
in g th compliance with
i ew y, Spe
ev
R cono y & m laws & other i nves cial
e ienc ss external tiga
c e tion
effi tiven ns regulations s

As nti f nt
e c o
Op anc ning

eff pera ti

sis fic
ide o ifica
or ati &

of o

tin ati
04
inf er ial
fin ami

ma ng

05
n

g w on
03
tio

sig risk
Ex

it h
n
06

s
02

in
Reviewing Assisting
Accounting & carrying
xter nal audit

07
Internal Control ou t e
res
01

Systems SCOPE procedu

 06 01
Managing
Communicating internal audit
results
PERORM
ANCE
05
Internal
STANDAR Risk
02

audit work D FOR management

INTERNA
L AUDIT
04 03
Governance Control
CHAPTER 7: INTERNAL COMPLIANCE AUDIT
AUDIT Check the implementation of written rules,
regulations and procedures.
SYSTEM BASED AUDIT
TRANSACTION AUDIT
Audit of internal controls within an 01 Involves the checking of a sample of
organisation
02 transactions against documentary evidence.
09
MANAGEMENT AUDIT RISK BASED AUDIT
‘An objective and independent Auditors use their judgement to decide
appraisal of the effectiveness of on the level of risk that exists in
managers and the corporate structure TYPES 03 different areas of the system, and to
08 OF plan their audit tests so that more
AUDIT effort is directed towards the most
SOCIAL & ENVIRONMENTAL AUDIT WORK risky areas.
Contributing to safeguarding the 04
environment by facilitating QUALITY AUDIT
07
management control of environmental Systematic investigation to establish
practices, and assessing compliance whether quality objectives are being
with company policies 06 05 met.

VALUE FOR MONEY AUDIT POST-COMPLETION AUDIT

Check the implementation of written rules, Objective and independent appraisal
regulations and procedures. of the measure of success of a project
6. The audit process

REVIEW, REPORT
08 AND
RECOMMEND AGREE THE
OBJECTIVES OF 01
THE AUDITING.
TEST
07 APPLICATION
OF CONTROLS
PLAN THE AUDIT 02
TEST
06 COMPLIANCE
WITH
FIND OUT
CONTROLS
ABOUT 03
SYSTEMS AND
ASSESS IF
05 CONTROLS
CONTROL
ARE ADEQUATE CONFIRM THE
OPERATION 04
OF THE SYSTEM
 t h e
e s of
ct iv
b j e
O it
1 Au
d

AUDIT 2 Conduct of the Audit

PLANNING
3 R
eso
u rce
s an
dT
imi
ng