Skip to content

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

During a review at Sundaram Steels Ltd, the internal auditor finds the stores department regularly orders more raw material than needed, blocking working capital, though the accounting records are correctly maintained. Why is this finding typical of internal audit rather than of the statutory audit?

This finding is typical of internal audit because its scope extends to the efficiency and economy of operations and recommending improvements, while the statutory audit centres on whether the financial statements are properly presented and not on operational inefficiency.

  1. AInternal audit looks at efficiency and economy of operations and can recommend improvements, beyond the correctness of the accountsCorrect
  2. BInternal audit examines only whether ledger entries are arithmetically accurate
  3. CStatutory auditors are required to report on all operational inefficiencies of every department
  4. DInternal audit is prohibited from commenting on working capital

Explanation

Excess ordering does not make the books wrong, so it is outside the core true-and-fair opinion. Internal audit scope includes operational efficiency, economy and effectiveness. The other options misstate the scopes.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit: Introduction and Overview shows your real accuracy, how long you take and where you lose marks.

Practise Internal Audit: Introduction and OverviewFree diagnostic mock

More Internal Audit: Introduction and Overview questions