Question

1.1plan an audit with reference to scope, materiality and risk

Jock is thinking of having internal auditors. However, he is not sure if they will help him. He has heard that they can be outsourced from an auditing firm or he can have his own internal auditors.

Explain to jock the following:

Outsourcing internal auditors

Advantages

Disadvantages

1.

2.

3.

Having internal auditors

1.

2.

3.

Answer 1

Advantages of internal audit
1) It gives a review of overall internal control system established by the management.
2) It furnishes the deviations in following the procedures adopted for safeguarding assets.
3) It appraises the organizational structure and management information system.

Disadvantages of internal audit
1) Over reliance by the management will make the staff take advantage of perpetrating frauds.
2) It is ideal for large companies as it may be very expensive to maintain and thus unaffordable by small companies.
3) Lack of support by management kills the morale and ability to perform its duties effectively.