Menu
Question Tag: Internal Audit
Search
500
+ past questions and counting.
- 20 Marks
AAA – May 2017 – L3 – Q3a – Internal Audit and Corporate Governance
Develop a presentation comparing the roles, independence, and responsibilities of external and internal auditors.
Question
Your firm has been external auditors of Specific Processors Plc for some years. Specific Processors Plc. has an Internal Audit Department engaged in both compliance and operational auditing within the company.
The head of the Internal Audit Department, Mr. Lucky Suleiman, FCA, has invited you to give a talk during their annual training week on the roles of external and internal auditors, the type of work they carry out, and their specific responsibilities.
Required:
Develop a suitable presentation focusing on the differences and similarities between external and internal auditors in terms of:
i. General Role
ii. Independence
iii. The work carried out in the following areas:
- Systems of Internal Control
- Operational Auditing
iv. Reporting Responsibilities
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
AAA – Nov 2022 – L3 – SC – Q6 – Internal Audit and Corporate Governance
Discuss reasons for outsourcing internal audit, advantages/disadvantages, and functions that cannot be outsourced.
Question
The Internal Audit Unit of Oluvia Bank Limited has been accused of collusion with staff in committing monumental fraud. The following types of fraud were found to be common:
- Cheque suppression
- Fraudulent bookkeeping to overstate income
- Inflation of the worth of the company’s assets
- Intercepting replaced customers’ cards
- Fraudsters impersonating Senior Managers or Chief Executive Officer
- Online banking fraud, such as phishing, malware attacks, and clone websites
- Impersonating the owner of an account or using fake documents to open an account under someone else’s name (no proper Know Your Customer conducted)
The bank examiners came and were surprised at the level of fraud in the bank and requested management to address it urgently.
After the supervisory visit, the board of directors discussed the issue with the bank’s external auditors, who suggested that the bank could outsource the internal audit functions. The Board of Directors found this suggestion favorable and mandated the Managing Director to act swiftly and report back with details at the next board meeting.
Required:
a. Discuss the main reasons for outsourcing internal audit functions. (3 Marks)
b. Outline the advantages and disadvantages of outsourcing. (10 Marks)
c. Discuss which part of the internal audit function cannot be outsourced. (2 Marks)
Find Related Questions by Tags, levels, etc.
Report an error
- 15 Marks
AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity
Explanation on internal audit necessity, maintaining independence, and internal audit limitations.
Question
In the apex bank‟s regulatory supervisory report to Dutse Bank Limited, the management has been directed to ensure institution of an Internal Audit Unit. Prior to this time, the bank believed that internal audit staff might be colluding with other staff to suppress information on fraudulent transactions and as such the desired result might not be achieved. Apart from this, it was considered that savings could be made from transport, hotel and other allowances to be paid to staff when on official assignments. The independent auditor had earlier mentioned the need for this in the audit report but management was of the view that it is acceptable to cross-train employees in different departments to be able to audit departments other than their own. In the opinion of management, this
will provide a more independent and unbiased view through checks and balances. The audit function they perform through multitasking will best add value to the progress of the organisation. It is also the belief of management that the basic processes of both accounting and auditing are similar. The two systems use essentially the same procedures and techniques of bookkeeping, computation and analysis. To them, accounting and auditing strive to ensure that the financial statements and records provide a fair reflection of the actual financial position of an organisation. Both activities are inter-related and go hand in hand, especially in setting up processes in the organisation, hence, there is no need for any Internal Audit Unit or duplication of efforts.
As the independent auditor of the bank, you were shown the regulatory supervisory report and you have been asked to make presentation to the Board of Directors on the necessity for the Internal Audit Unit in the bank.
Required:
a. Explain the need for the internal audit functions in an organisation. (5 Marks)
b. State the various measures that can be taken to protect the independence of internal auditors. (5 Marks)
c. Explain the weaknesses and limitations of internal audit. (5 Marks)
Find Related Questions by Tags, levels, etc.
Report an error
- 20 Marks
AA – Nov 2014 – L2 – Q4 – Fraud and Error
Describe how internal and external auditors handle fraud and error risks, and evaluate specific fraud risks at Rock Holidays.
Question
Fraud and error present risks to an entity. Both internal and external auditors are required to deal with risks in an entity. However, the responsibilities of internal and external auditors in relation to the risk of fraud and error differ.
Required:
a. Explain how the internal audit function helps an entity with the risk of fraud and error. (7 Marks)
b. Explain the responsibilities of external auditors with respect to the risk of fraud and error in an audit of financial statements. (7 Marks)
c. Rock Holidays is an independent travel agency. It does not package holidays itself. It takes commission on holidays sold to customers through its chain of high street shops. Staff are partly paid on a commission basis. Well-established tour operators run the holidays that Rock Holidays sells. The network reservations system through which holidays are booked and the computerized accounting system are both well-established systems used by many independent travel agencies.
Payments by customers, including deposits, are accepted in cash and by debit and credit cards. Rock Holidays is legally required to pay an amount of money (based on its total sales for the year) into a central fund maintained to compensate customers if the agency should cease operations.
Describe the nature of the risks arising from fraud and error to which Rock Holidays is subject. (6 Marks)
Find Related Questions by Tags, levels, etc.
Report an error
- 20 Marks
CSME – May 2022 – L2 – SB – Q2 – Risk Management and Corporate Strategy
Advise on risk management for a supermarket chain facing security challenges and new regulations.
Question
A supermarket chain recently established more outlets in the city. Due to increased risk exposure occasioned by heightened insecurity in the country, the company saw the need to implement an effective management strategy aimed at minimizing attendant risks. The need is made even more apparent due to the introduction of more stringent regulatory requirements on handling perishable food items by the National Agency for Food and Drugs Administration and Control (NAFDAC). To this end, you have been engaged to provide advice to the company on risk management.
Required:
a.
- i. Using the ALARP principle, advise the management on how to effectively manage the company’s risks. (2 Marks)
- ii. Advise the company on the need to engage a risk manager. (2 Marks)
- iii. Enumerate the roles of a risk manager. (5 Marks)
b.
- i. What is a risk audit? Should the firm engage internal or external auditors (or consultants) to conduct a risk audit? Justify your position. (7 Marks)
- ii. Illustrate to the management of the company the stages involved in conducting a risk audit. (4 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: ALARP Principle, External audit, Internal Audit, Risk Assessment, Risk Audit, Risk Management
- Level: Level 2
- Topic: Risk Management and Corporate Strategy
- Series: MAY 2022
Report an error
- 30 Marks
AA – Nov 2016 – L2 – Q1 – Internal Audits
This question addresses internal audit functions, the differences between internal and external auditors, outsourcing internal audit, and risk categories considered by internal auditors.
Question
KEMTA Nigeria Limited is a private electrical and mechanical engineering company. The company is one of the major players in the provision of cutting-edge engineering construction services in the Nigerian electrical, mechanical, and communication engineering industry. The company has sites in all 36 States of the Federation, including Abuja. They also work for major financial institutions, educational institutions, Federal, State, and Local Governments. The company has over 500 professionals, skilled, and unskilled workers on its payroll.
You have been the auditor of the company for the past five years. During your audit, you observed some weaknesses in the internal control system of the company. Your review of the domestic reports showed that your firm has been recommending the establishment of an internal audit department for the past three years. However, you observed that the Managing Director is not favorably disposed to this idea, seeing it as an additional cost to the company. He requested to know more about outsourcing the internal audit department.
Required:
a) State and explain the purpose and functions of internal audit in an organisation. (5 Marks)
b) Enumerate the fundamental differences between the internal and external auditors. (10 Marks)
c) Present:
i) The main reasons for outsourcing internal audit. (3 Marks)
ii) The benefits of outsourcing. (2 Marks)
iii) Possible problems of outsourcing. (4 Marks)
d) Identify and explain the THREE main categories of risks usually considered by internal auditors. (6 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: External audit, Internal Audit, Internal Control, Outsourcing, Risk Categories
- Level: Level 2
- Topic: Internal Audits
- Series: NOV 2016
Report an error
- 10 Marks
PSAF – Nov 2020 – L2 – Q2a – Public Sector Audit
Discuss the external auditors' reliance on internal audit functions and reasons for rising public expenditure.
Question
An internal audit is an independent appraisal activity within an organisation for the review of accounting, financial, and other operations with the objective of assisting members of the organisation to discharge their responsibilities effectively. It is a sound policy to establish constructive working relationships with internal audit units to foster the development, promote coordinated coverage, and avoid duplication.
Required:
Explain the five criteria employed by the external auditors to assess the likely effectiveness and relevance of the internal audit functions and five areas where the internal audit functions can be of assistance to the external audit.
Find Related Questions by Tags, levels, etc.
- Tags: Audit Effectiveness, External audit, Internal Audit, Public Sector
- Level: Level 2
- Topic: Public sector audit
- Series: NOV 2020
Report an error
- 20 Marks
AA – Nov 2020 – L2 – Q4 – Internal Audits
Differentiate between internal and external audit, list internal auditors' activities, justify the need for internal audits, and explain measures to protect auditor independence.
Question
Range Nigeria Limited is a large private company, with a financial year end of March 31, 2020, and has been an audit client of your firm for several years. The board of directors has asked your firm if they would be able to provide internal audit services to the company.
Required:
a. Differentiate between internal and external audits. (6 Marks)
b. List the activities of internal auditors. (4 Marks)
c. Justify the need for internal audits. (4 Marks)
d. Explain the measures that can be taken to protect the independence of auditors, given that auditors are expected to be independent, including internal audit. (6 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: External audit, Independence, Internal Audit
- Level: Level 2
- Topic: Internal Audits
- Series: NOV 2020
Report an error
- 6 Marks
FR – May 2020 – L2 – Q5a – Ethical Dilemmas in Tendering Process
This question focuses on the ethical course of action in tendering when faced with insider information in the internal audit context.
Question
Mrs. Stella Amoah (Stella), a Chartered Accountant and Head of Internal Audit in Ningo Communications Authority (NCA), is about to tender for a contract in Internal Audit Service. A new member of her team, Mr. Stephen Appiah Coker (Stephen), has been recruited from the Internal Audit Service, where he previously worked in the department responsible for devising the tender contract. Although Stephen was not involved with the tender process, his former colleague and friend is responsible for the tender specification document and the evaluation process.
Stephen had sight of some of the requirements and has offered to share with Stella information that may be of use when preparing the tender. However, this information is confidential and should not be seen by any of the tendering parties.
It will be an open tender process for both external and internal providers. Bids from external providers are being encouraged. The evaluation process has been designed with this in mind. If the contract is awarded externally, Stella will be unsure of her personal position in the organization. She understands that using any insider knowledge of the tendering process would be inappropriate when preparing the tender proposal, but she feels she would have a better chance of success if she used this confidential information.
Required:
Advise Mrs. Stella Amoah on THREE (3) courses of action she should take in order to act ethically in the tendering process given in the above scenario.
Find Related Questions by Tags, levels, etc.
Report an error
- 10 Marks
AA – April 2022 – L2 – Q4b – Internal Audit and External Audit Relationship
Proposes the establishment of an internal audit unit and explains the benefits of outsourcing the function to an external firm.
Question
b) Aggya Owusu & Co is a well-established audit firm licensed by the Institute of Chartered Accountants, Ghana (ICAG). The firm is a member of a global association of over 250 independent legal and accounting firms in more than 100 countries.
Aggya Owusu & Co has been the External Auditor of BetGhana Ltd (BetGhana) for about four years. BetGhana has recently been awarded a provisional license by the Gaming Commission of Ghana to operate an Online Sports betting operation. The provisional license requires BetGhana to establish a unit with sufficient independence from the day-to-day management and control to enable the effective review of the business and promote a compliance environment, undertake betting-customer due diligence with respect to money laundering and terrorist financing.
Required:
As the Audit Manager of Aggya Owusu & Co, write a proposal to the Directors of BetGhana explaining:
i) The need for an Internal Audit Unit. (5 marks)
ii) FOUR (4) benefits of outsourcing the Internal Audit function to Aggya Owusu & Co. (5 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Proposal, Corporate Governance, Internal Audit, Outsourcing
- Level: Level 2
- Topic: Internal Audit and External Audit Relationship
- Series: APR 2022
Report an error
- 10 Marks
AA – Mar 2024 – L2 – Q4b – Internal Audit and Its Relationship with External Audit
Explain the differences between internal and external auditors in fraud prevention, detection, and reporting responsibilities.
Question
There are similarities and differences between the responsibilities of internal and external auditors. Both internal and external auditors have responsibilities relating to the prevention, detection, and reporting of fraud, for example, but their responsibilities are not the same.
Required:
In reference to the statement above, explain the difference between the responsibilities of internal auditors and external auditors in relation to:
i) Prevention and detection of fraud. (5 marks)
ii) Reporting of fraud. (5 marks)
Find Related Questions by Tags, levels, etc.
- Tags: External audit, Fraud Detection, Fraud Prevention, Internal Audit, Reporting of Fraud
- Level: Level 2
- Topic: Internal Audit and Its Relationship with External Audit
- Series: MAR 2024
Report an error
- 20 Marks
CSEG – Nov 2018 – L2 – Q3 – Corporate governance framework | Internal control and audit
Discuss the role and responsibilities of the audit committee in relation to external audit and internal controls, and suggest changes to address internal control failures.
Question
ABB Bank Ltd (ABB Ltd) is a listed company. It has been given a substantial fine by the Central Bank for serious breaches of the banking regulations and, in the same month, the bank reported that it had suffered large losses because of unauthorized dealings in financial derivatives by a manager in its treasury department. The company’s reported profits for the previous financial year were overstated because of these losses.
The chairman of the audit committee of ABB Ltd has resigned, accepting responsibility for failures by the committee. A newly-appointed director has been made chairman of the audit committee. He has called a meeting with you, the Finance Director. The purpose of the meeting is to review financial reporting and internal control, with a view to making recommendations to the board. ABB Ltd does not have a strong internal audit function, and the company has been using the same firm of external auditors since it acquired its listing 8 years ago.
Required:
a) Explain the role and responsibilities of the audit committee of ABB Ltd with regards to:
i) The external audit of the company’s financial statements; and (6 marks)
ii) The internal control system and internal audit function. (6 marks)
b) In relation to the possible failures in internal controls that have occurred, suggest FOUR (4) changes that might be recommended to the board at the next board meeting. (8 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Committee, External audit, Financial Reporting, Fraud, Governance, Internal Audit, Internal Control
- Level: Level 2
- Topic: Corporate governance framework, Internal control and audit
- Series: NOV 2018
Report an error
- 10 Marks
CSEG – May 2019 – L2 – Q6a – Internal control and audit
Evaluate the objectives the Board of Events Tech seeks to achieve by establishing an internal audit department.
Question
Events Tech is a growing media company that specializes in technological solutions for events planning. Events Tech has recently established an internal audit department, and the Board is keen for this new department to cover certain broad areas of the organization and add value to the organization.
Required:
Evaluate FIVE (5) objectives the Board of Events Tech seeks to achieve by establishing an internal audit department.
Find Related Questions by Tags, levels, etc.
- Tags: Governance, Internal Audit, Objectives, Organizational Control, Risk Management
- Level: Level 2
- Topic: Internal control and audit
- Series: MAY 2019
Report an error
- 10 Marks
AAA – May 2021 – L3 – Q5b – Audit-related services | Assurance services
Discuss how audit software can be used to audit revenue and trade receivables and evaluate the extent of reliance on internal auditor's use of embedded software.
Question
Mike Developers’ Audit Manager is of the view that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with Mike Developers’ Finance Director, and this approach has been agreed as a feasible one. Furthermore, the Finance Director has asked the internal audit team to investigate the possibility of installing embedded software to help the external auditors in their work.
Required:
i) Describe, giving examples, how audit software, in general, could assist the audit firm in their audit of revenue and trade receivables. (6 marks)
ii) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software. (4 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Software, Embedded Software, Internal Audit, Revenue Audit, Trade receivables
- Level: Level 3
- Topic: Assurance services, Audit-related services
- Series: MAY 2021
Report an error
- 10 Marks
AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing
Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.
Question
Your audit client, Asuoyeboa Ltd, has recently hired an Internal Auditor to deal with increased regulatory requirements. Afrakoma, the CEO of Asuoyeboa Ltd, has indicated that she believes the presence of the Internal Auditor will dramatically reduce the work that your audit firm will have to perform. She anticipates that this will have an impact on the audit fee.
Required:
Draft a report indicating factors that will influence the extent to which the external auditors will rely on the Internal Auditors’ work as per the requirements imposed by ISA 610: Using the Work of Internal Auditors. (10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Fees, Audit Reliance, External audit, Internal Audit, ISA 610
- Level: Level 3
- Topic: Internal audit and outsourcing, The audit approach
- Series: MAY 2021
Report an error
- 10 Marks
AAA – May 2016 – L3 – Q4a – Public sector audit | Internal audit and outsourcing
Communicate the functions of the Internal Audit Agency according to the Internal Audit Agency Act (2003).
Question
Dr. Kofi Mensah has been appointed the Municipal Chief Executive (MCE) of Kyekyewere Municipal Assembly. He has assumed duty early last month and has carried out a familiarisation tour of all the departments of the Assembly.
You are the Internal Auditor of the Assembly and have worked there for the past two years. During your turn of briefing the MCE, you mentioned to him that the Internal Audit Agency (IAA) exists as an apex oversight body of internal audit units working within MDAs and MMDAs. It was established by the Internal Audit Agency Act (2003) with the objective to co-ordinate, facilitate and provide quality assurance for internal audit activities within the MDAs and MMDAs. At the end of your briefing, the MCE requested more information on the IAA, especially its functions. You were pleased with the MCE and formally welcomed him to the Assembly.
Required:
Communicate to the MCE in the appropriate form, detailing out the functions of the Internal Audit Agency according to the Internal Audit Agency Act (2003). (10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Agency, Functions, Government Accountability, Internal Audit, Public Sector
- Level: Level 3
- Topic: Internal audit and outsourcing, Public sector audit
- Series: MAY 2016
Report an error
- 10 Marks
AAA – May 2016 – L3 – Q2b – Internal audit and outsourcing | Practice management
Draft a report assessing the need for an internal audit department in a growing company.
Question
Adepa Ltd, a fruit processing company, has been in operation for many years. It has managed to grow the business over the years and now has eight branches, four in rural areas and four in urban towns in addition to the head office. The management and those charged with governance are looking forward to the company adopting the latest technology in production – Advanced Technology Manufacturing (ATM) – and marketing and sales through the internet.
During the last audit of the financial statements of the company, the Managing Director suggested to the Senior Partner an assessment of the need for an internal audit department in the company. You were the audit manager who led the engagement team to do the audit. The Senior Partner has therefore asked you to carry out the assignment to assess the need for an internal audit in Adepa Ltd.
Required:
Draft a report to the Senior Partner on the assessment of the need for an internal audit department for Adepa Ltd., highlighting the factors to be considered in such assessment. (10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit report, Internal Audit, Management, Needs Assessment
- Level: Level 3
- Topic: Internal audit and outsourcing, Practice management
- Series: MAY 2016
Report an error
- 10 Marks
AAA – Nov 2017 – L3 – Q4b – Internal Audit and Outsourcing, Practice Management
Evaluate the role of internal audit in contributing to the effective running of an organization.
Question
Question:
Internal audit assists management in achieving the entity’s corporate objectives, particularly in establishing good corporate governance. Internal audit can be involved in many different assignments as directed by management. The assignments that internal auditors will carry out depend on the particular circumstances of the company involved and their objectives.
Required:
Evaluate the contribution of the internal audit function to the effective running of an organization. (10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Corporate Governance, Internal Audit, Organizational Effectiveness
- Level: Level 3
- Series: NOV 2017
Report an error
- 20 Marks
PSAF – May 2021 – L2 – Q5a – Public sector fiscal planning and budgeting
Analyze the budget performance of Atuum District Assembly and explain the functions of internal audit under the Public Financial Management Act.
Question
a) Since the creation of Atuum District Assembly (ADA) in 2011, inadequate revenue mobilization has been its major challenge making the Assembly unpopular. The newly appointed District Chief Executive (DCE) is concerned about the effectiveness of the revenue budget system of the Assembly.
Below is the extract of the Revenue Budget of the Assembly for the 2021 financial year:
| Revenue | Annual Budget (GH¢) | Actual to March (GH¢) |
|---|---|---|
| Licenses | 880,000 | 244,000 |
| Fees and Miscellaneous charges | 3,400,000 | 890,000 |
| Investment income | 600,400 | 178,000 |
| Property rate | 5,400,000 | 1,310,000 |
| Basic Rate | 750,000 | 120,000 |
| Grants and donations | 1,000,000 | 320,000 |
The budget allocation over the various items over the quarters is in the ratio of 3:3:2:2. The DCE indicates that the budget reliability measures of Public Expenditure and Financial Accountability (PEFA) are ideal for assessing the budget performance of the Assembly. In the framework, the following interpretation is given to budget outturns:
- Outturn/variance not greater than 5% is scored as A, indicating very good budget reliability.
- Outturn higher than 5% but not exceeding 10% is scored B, indicating good budget reliability.
- Outturn higher than 10% but not exceeding 15% is scored C, indicating average budget reliability.
- Outturn higher than 15% is scored as D, indicating poor budget reliability.
Note that each revenue item is treated as an indicator under the PEFA framework.
Required:
i) As the Budget Officer, prepare the statement of budget performance for the first quarter of the 2021 financial year, indicating clearly the outturn percentage and the respective scores. (5 marks)
ii) Write a report to the DCE on the budget performance of the Assembly and suggest ways of improving the budget reliability of the Assembly. (6 marks)
iii) Discuss FOUR (4) benefits of effective revenue budgeting in the Assembly. (4 marks)
b) In a recent audit committee meeting, there arose a serious disagreement between the Director of Finance and the Chief Internal Auditor concerning the internal audit role in the public sector. The Internal Auditor insists that internal audit’s primary responsibility in the public sector is to carry out intensive pre-audit or to vouch. He concludes that internal audit without pre-audit is useless and unfit for purpose. The Director of Finance opposed this view vehemently, arguing that pre-audit is an old-fashioned practice in the public sector and in the 21st century this should not be encouraged in a forward-looking organization like theirs.
Required:
As a member of the Audit Committee, educate the two key officers of the organization on the functions of the internal audit under the Public Financial Management Act, 2016 (Act 921). (5 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Budget Performance, Internal Audit, PEFA Framework, Public Financial Management
- Level: Level 2
- Topic: Public sector fiscal planning and budgeting
- Series: MAY 2021
Report an error