Discuss the benefits of Tark Co establishing an Internal Audit Department. (8marks)
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An internal audit department could look at existing procedures and systems in operation at Tark and make lots of useful recommendations to tighten up areas where there are deficiencies in controls.
An internal audit department could carry out value for money audits, looking at the economy, efficiency and effectiveness of processes and activities within the entity.
The internal auditors could examine the IT systems in place and make recommendations regarding these, including looking at the programmed controls.
The internal auditors could undertake financial audits to substantiate information in management and financial reporting.
The internal audit department could make recommendations in respect of good corporate governance, even though the company may not be required to comply with corporate governance guidelines.
The external auditors might be able to rely on work undertaken by the company’s internal auditors and this in turn could result in a reduced audit fee.
The company has to comply with financial services regulations so an internal audit department could undertake work to ensure that it is complying with all required legislation and regulations.
The presence of an internal audit department within the company would present a positive image to clients of the company and to shareholders.