Tag: Topic 2

To which ONE of the following stakeholders / parties would the internal auditor report into?

Select ONE answer:

1. Employees
2. Shareholders
3. Audit committee
4. External auditors

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – external auditors report to the shareholders and, although internal auditors will normally provide information to the external auditors, they do not formally report to them.
4. Not correct

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Which ONE of the following best describes the term ‘operational audit’?

Select ONE answer:

1. Any audit performed by the internal auditor
2. An audit of the operational processes of the organisation
3. An audit performed by the operations director
4. A statutory audit

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – An operational audit is just one type of work carried out by the internal auditor. Another audit work activity might include, for example, investigation into a suspected fraud. Therefore, the term does not apply to all internal audit work.
3. Not correct
4. Not correct

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Many of the procedures undertaken by the internal auditor are very similar to those performed by the external auditor.

Which ONE of the following may NOT be performed by the internal auditor if the internal auditor is to operate effectively?

Select ONE answer:

1. Expressing an opinion on the truth and fairness of the financial statements
2. Monitoring of internal controls
3. Making recommendations regarding improvements to controls
4. Examining and testing financial information

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Expressing an opinion on the truth and fairness of the financial statements is done by the external auditor only.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Internal and external auditors provide different services to companies.

For each of the following examples, select whether it is a service which would be provided by internal auditors only, by external auditors only or by either.

• Statutory audit

Select ONE answer:

1. Neither
2. Internal Auditors
3. External Auditors
4. Either

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – External auditors are responsible for carrying out the statutory audit. Internal auditors are responsible for the monitoring of internal controls. External auditors, as part of their external audit, will not monitor internal controls but must at least ascertain the controls in place and document them. They may then choose to test them for purposes of reliance.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex Manufacturing is a global group of engineering businesses.

The parent company, Alex Manufacturing plc, employs an internal audit function which carries out audits and investigations on the individual businesses in the group.

Which ONE of the following could the internal audit function carry out and still operate effectively?

Select ONE answer:

1. Special investigation into the canteen food of the Stafford Manufacturing unit, where the PLC group directors suspect the food is not up to group quality levels
2. Testing of the internal controls at the Glasgow Manufacturing unit as part of a routine internal audit cycle
3. Secondment to the accounts department of the Derby Manufacturing unit to cover the maternity leave of the financial controller
4. Identification of risks at the proposed Johannesburg sales and manufacturing unit, which is due to open in twelve months’ time

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – Secondment to the financial controller role and being involved in the identification of risks should not be carried out by the internal auditor. This is because these roles are operational and would compromise the ability of internal audit to provide a monitoring role. The risk assessment should be undertaken by the risk assessment committee or whoever is responsible for risk assessment.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.