MF0013 - INTERNAL AUDIT AND CONTROL




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(May 2012)
Master of Business Administration - Semester 3
MF 0013: “INTERNAL AUDIT AND CONTROL”
(4 credits)
(Book ID: B1211)
ASSIGNMENT- Set 1
Marks 60
Note: Each Question carries 10 marks. Answer all the questions.
1. Write a note on the following:

a. Internal Audit
Answer :
Internal Audit The Governing Body of each agency is responsible for establishing the internal audit function and the head of internal audit is primarily accountable to the Governing Body. The head of internal audit will report to the Audit Committee on their function, and to the chief executive (or to an officer nominated by the chief executive) for administrative purposes such as for authorisation of expenditure and approval of travel and leave.
Guideline
The governing body is responsible for determining the need for and scope of internal audit activity. It may delegate this responsibility to the Audit Committee. The head of internal audit ideally would have no executive or managerial powers, authorities, functions or duties except those relating to the management of the internal audit function. The head of internal audit should be responsible to an individual in the organisation with sufficient authority to promote independence and to ensure broad audit coverage, adequate consideration of engagement communications and appropriate action on engagement recommendations.
Each agency must establish an internal audit function where it is cost effective to do so.
Guideline
An internal audit function should be established, unless the costs of such a function outweigh the benefits to be derived. This may be the case where size, risks, complexity, geographical distribution or materiality do not justify the associated cost. In determining the need for an internal audit function, consider:
the size and scale of the organisation;
the organisation’s complexity / diversity;
the organisation’s overall risk profile;
the history of past issues and incidents;
cost benefit; and
the existence of alternative mechanisms to provide adequate assurance on compliance and the operation of internal controls. If an internal audit function is not warranted the governing body must take alternative steps to obtain an appropriate level of assurance from an equivalent function. Alternative in-house assurance activities and / or compliance functions that are sufficiently robust and rigorous may
 be regarded as an “equivalent function”.
 The need for an internal audit function should be reviewed annually. 

b. Code of ethics for internal auditor

Q2. Comment on “An auditor is a watch dog and not a blood hound’.

Q3. List out the factors that influence the control environment prescribed by SA 400: Risk assessment and internal control.

Q4. If you are an internal auditor of a branch of an insurance company, how do you prepare internal control scheme.

5. Explain the appraisal of accounting system and related internal control.
Q6. Mention some of the general EDP controls.

(May 2012)
Master of Business Administration - Semester 3
MF 0013: “INTERNAL AUDIT AND CONTROL”
(4 credits)
(Book ID: B1211)
ASSIGNMENT- Set 2
Marks 60
Note: Each Question carries 10 marks
1. Write a note on the following:

a. Internal audit
Answer  : The Governing Body of each agency is responsible for establishing the internal audit function and the head of internal audit is primarily accountable to the Governing Body. The head of internal audit will report to the Audit Committee on their function, and to the chief executive (or to an officer nominated by the chief executive) for administrative purposes such as for authorisation of expenditure and approval of travel and leave.
Guideline
The governing body is responsible for determining the need for and scope of internal audit activity. It may delegate this responsibility to the Audit Committee. The head of internal audit ideally would have no executive or managerial powers, authorities, functions or duties except those relating to the management of the internal audit function. The head of internal audit should be responsible to an individual in the organisation with sufficient authority to promote independence and to ensure broad audit coverage, adequate consideration of engagement communications and appropriate action on engagement recommendations.
Each agency must establish an internal audit function where it is cost effective to do so.
Guideline
An internal audit function should be established, unless the costs of such a function outweigh the benefits to be derived. This may be the case where size, risks, complexity, geographical distribution or materiality do not justify the associated cost. In determining the need for an internal audit function, consider:

the size and scale of the organisation;

the organisation’s complexity / diversity;

the organisation’s overall risk profile;

the history of past issues and incidents; cost benefit; and  the existence of alternative mechanisms to provide adequate assurance on compliance and the operation of internal controls. If an internal audit function is not warranted the governing body must take alternative steps to obtain an appropriate level of assurance from an equivalent function. Alternative in-house assurance activities and / or compliance functions that are sufficiently robust and rigorous may
 be regarded as an “equivalent function”.
 The need for an internal audit function should be reviewed annually.

b. Statutory audit

Q2. Differentiate internal audit and internal check.

Q3. Describe internal audit tests.
Q4. Develop an internal control scheme for Banks.
Q5. Discuss the role of internal auditor as a part of management.

6. Explain the problems encountered in an Electronic Data Processing Environment.
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