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ACCA Applied Knowledge · Business and Technology · Internal controls

An internal auditor at Brandt Co finds that purchase orders above the approval limit were repeatedly authorised by one manager alone. Which action best reflects the proper role of internal audit?

The internal auditor should report the weakness and recommend improvements to the audit committee or senior management, who remain responsible for implementing them. Taking over authorisation or altering system limits would involve operational duties and compromise objectivity, since internal audit would later review its own work.

  1. AReport the weakness and recommend improvements to the audit committee or senior management, leaving management responsible for implementing themCorrect
  2. BTake over authorisation of high-value purchase orders to ensure the control works
  3. CAmend the approval limits in the system personally and inform management afterwards

Explanation

Internal audit identifies control weaknesses, reports them and recommends improvements; management owns the controls and decides on implementation. Performing authorisations or changing system limits would be taking on operational responsibility, which would impair objectivity because internal audit would then audit its own work.

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