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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

At Rao Pharma Ltd., the internal auditor spends the year checking whether employees have followed approved procedures and also recommends redesigning the procurement workflow to cut delays. Which statement best reflects the modern concept of internal audit?

Modern internal audit combines assurance on compliance with advisory recommendations to improve operations, while leaving decision-making to management. It is not limited to arithmetical checks or asset verification, and it should not take over implementing controls, since that would weaken independence.

  1. AIt covers both assurance on compliance and advisory suggestions for improving operations, without taking management decisionsCorrect
  2. BIt is confined to detecting arithmetical errors in ledgers and nothing more
  3. CIt must take over the design and implementation of controls as management's replacement
  4. DIt is restricted to verifying the existence of physical assets at year end

Explanation

Modern internal audit goes beyond arithmetical checking and covers compliance, efficiency and advice. The auditor may recommend improvements but must not take management's decisions or implement controls, which would affect independence. The ledger-only and asset-only views are the old narrow concept.

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