You have responded to an advertisement by a reputable company for the appointment of an internal auditor. You realized the need to prepare well for the interview.
Required:
In anticipation of the questions you may be asked at the interview discuss the role of internal audit in corporate governance and risk management. (10 marks)
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Internal Audit and Corporate Governance: Established codes of corporate governance highlight the need for business to maintain good systems of internal control to manage risks the company faces. Internal audit can play a key role in assessing and monitoring control policies and procedures. The internal audit function can assist the board in other ways as well:
In effect, acting as auditors for the board
By being the experts in fields such as auditing and accounting standards in the company and assisting in implementing new standards
By liaising with external auditors, particularly, where external auditors can use internal audit work and reduce the time and therefore cost of the external audit. (5 marks)
Internal Audit and Risk Management: Internal auditors have two roles to play in relation to organisational risk management. One is to ensure the company’s risk management system operates effectively. And secondly to ensure that strategies implemented in respect of business risks operate effectively.
As a significant risk management policy is to implement internal controls, internal audit has a key role in assessing systems and testing controls.
Internal audit may assist in the development of systems, however its key role will be in monitoring the overall process and providing assurance that the systems which the departments have designed meet objectives and operate effectively.
It is important that the internal audit department retains its objectivity towards these aspects of its role, which is a reason why internal audit would generally not be involved in the assessment of risks and the design of the systems.
(5 marks)