Page 95 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 3. Safeguarding and adequate utilization of business assets: Internal audit has to ensure that
all assets of the company are properly recorded. It has to verify assets utilization report
and determine whether fixed targets have been achieved or not. For example, suppose
internal auditor found that valuable scrap is not being properly recorded in the books, he
should include this observation in his audit report.
4. Reliability of Management Information System (MIS): Internal Audit ascertains the
reliability of financial and operating reports prepared throughout the organization. The
management relies on the reports of internal auditors as they provide an assurance as to
validity of records and transactions of the enterprise.
5. Suggesting improvements: The ultimate objective of internal audit is to assist management
in the effective discharge of their responsibilities by furnishing them with proper
suggestions for improvements.

Self Assessment

State whether the following statements are True or False:
1. Internal audit is an independent activity.
2. Internal audit is basically an evaluation and reporting function of financial areas only.



Caselet The Effectiveness of Internal Audit in
Central Government

he National Audit Office has today published a report examining the effectiveness
of internal audit in central government, covering both main departments and their
Tassociated arm’s length bodies. Government is not getting the most out of the £70
million it spends on internal audit because the service does not always focus on the right
issues and it is often not of sufficient quality to be useful in decision-making.

According to today’s report, Chairs of Audit Committees and other senior stakeholders
expect more from their internal audit service. Although 84 per cent of respondents to an
NAO consultation considered internal audit added some or substantial value to their
organization, they had concerns over the current depth of insight, relevance and underlying
execution of internal audit work. Many key stakeholders believe that internal audit work
is not sufficiently tailored to be relevant to the different issues facing individual
organizations.

Treasury guidance on what internal audit should deliver is not sufficiently specific, leading
to expectations of internal audit being unclear. There is little consistency in the application
of standards. Variations in quality and coverage mean that the NAO often cannot take
assurance from internal audit work, and it is often of insufficient scope or quality for the
spending watchdog’s external audit work.
There are specific areas where internal audit could be more effective. Users of internal
audit identified particular gaps in such areas as the usefulness and relevance of reports; the
expertise of staff, including expertise on IT-based information systems; the identification
of efficiencies in the organization; and the ability to offer advice to senior management.
Contd....

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