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ACCA Strategic Professional · Strategic Business Leader · Internal control and management reporting

Brightwell Logistics is a rapidly growing company with 40 depots. The board is deciding whether to set up an internal audit function. Management argue that the external auditors already test controls. Which point most strongly supports establishing internal audit?

The strongest argument is that internal audit can be directed by the board to review operations, risk management and compliance across all depots. External audit focuses on an opinion on the financial statements, so it does not meet these wider internal needs.

  1. AInternal audit can be scoped by the board to review operational efficiency, risk management and compliance across depots, beyond the financial statements opinion of the external auditorCorrect
  2. BInternal audit removes the need for the annual external audit
  3. CInternal audit can sign the financial statements opinion jointly with the external auditor
  4. DInternal audit will guarantee that fraud is eliminated

Explanation

External audit is aimed at an opinion on the financial statements for shareholders. Internal audit's scope is set by management or the board and can cover value for money, risk and compliance. It cannot replace the statutory audit, share in the opinion, or guarantee fraud elimination.

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